Global Trade Uncertainty Drives US Dollar Gains
The US dollar rose on Friday as global trade uncertainty continued to intensify, with President Donald Trump announcing additional tariffs and threatening blanket levies of 15% or 20% on most trade partners. This move has left investors scrambling for answers, causing market volatility to increase. The Canadian dollar was among the biggest losers, falling more than 0.5% to 1.3726 per US dollar after Trump announced a 35% tariff rate for goods imported from Canada, effective August 1.
Tariff Announcements Spark Market Reactions
Trump's latest comments on trade policy have added to the uncertainty surrounding his evolving strategy. The European Union could receive a letter on tariff rates by Friday, throwing into question the progress of trade talks between Washington and the bloc. The euro fell 0.25% to $1.1671 and was headed for a weekly decline of nearly 1%. The risk-sensitive Australian dollar also slipped 0.31% to $0.6568 as the overall market mood turned sour.
Market Analysts Weigh In on Tariff Impact
IG market analyst Tony Sycamore noted that the tariff headlines have been largely ignored, but Canada's inclusion in Trump's tariffs has caught investors off guard. "Canada finds itself in the firing line and it's obviously not the end of the week we wanted to see, so you'd expect to see risk assets fall because there is a risk of escalation from several parties," Sycamore said.
Brazilian President Seeks Diplomatic Solution
Meanwhile, Brazil's President Luiz Inacio Lula da Silva expressed his desire to find a diplomatic solution to Trump's threat of 50% tariffs on Brazilian imports. Da Silva vowed to reciprocate like-for-like if the tariffs take effect on August 1. The Brazilian real was last little changed at 5.5321 per dollar, though was set to lose 2% for the week - its steepest weekly decline in nearly five months.
Sterling and Yen React to Tariff Announcements
Elsewhere, sterling was down 0.22% at $1.3551, reversing slight gains from earlier in the session, and was set to lose more than 0.6% for the week. The New Zealand dollar fell 0.32% to $0.6013 and the yen eased 0.13% to 146.44 per dollar.
Cryptocurrencies Hold Steady
In cryptocurrencies, bitcoin was last up 1.8% at $115,609.10, holding near a record high of $116,746.70. Ether jumped more than 4% to touch a five-month high of $2,998.41.
Market Outlook Remains Uncertain
Despite the market's reaction to Trump's tariff announcements this week being largely muted compared to the manic post "Liberation Day" selloff in April, investors remain on tenterhooks over the outlook for global trade and whether Trump's August 1 deadline is final. This uncertainty has kept the dollar supported, and against a basket of currencies, the greenback was last up 0.2% at 97.77 and set to end the week with a 0.8% gain.
Analysts Expect Dollar Stability to Continue
For now, analysts expect dollar stability to continue due to the uncertainty surrounding Trump's trade policy. "I think the uncertainty is just playing to a little bit of U.S. dollar stability, and I wouldn't be too surprised if that holds for another couple of weeks," said Ray Attrill, head of FX research at National Australia Bank.
Conclusion
The US dollar rose on Friday as global trade uncertainty intensified, with President Donald Trump announcing additional tariffs and threatening blanket levies on most trade partners. The Canadian dollar was among the biggest losers, falling more than 0.5% to 1.3726 per US dollar after Trump announced a 35% tariff rate for goods imported from Canada. The market outlook remains uncertain, with investors waiting for clarification on Trump's trade policy and its impact on global markets. For now, the dollar is expected to remain stable due to the uncertainty surrounding Trump's evolving strategy.