The U.S. dollar lost ground on Thursday as the initial excitement over a trade deal with China faded. Speculation that the Trump administration may be pushing for a weaker dollar also weighed on the currency.
Dollar Index Dips Despite Weekly Gains
As of 04:40 ET (08:40 GMT), the U.S. Dollar Index—which measures the dollar against six major currencies—fell 0.3% to 100.580. Despite the drop, the index remained on track for modest gains over the week.
Earlier in the week, the dollar had strengthened following news that the U.S. and China had agreed to pause new tariffs. This raised hopes that the two largest economies were moving closer to resolving their trade dispute, which began in early April.
Trade Policy and Currency Speculation Pressure the Greenback
Investor sentiment quickly shifted, however, due to President Donald Trump’s unpredictable trade strategies. Although the recent deal provided some support, the dollar remains down about 7% for the year.
Adding to the pressure were reports of meetings between U.S. and South Korean officials last week to discuss the dollar-won exchange rate. Similar discussions between the U.S. and Taiwan earlier this month have sparked rumors that the Trump administration is seeking to weaken the dollar intentionally.
Analysts at ING noted, “We doubt we will see any accord to deliver stronger currencies, but one can see why the speculation is there and may linger over the dollar for the next couple of months.”
U.S. Retail Sales and Fed Speech in Focus
Markets are now watching for U.S. retail sales data expected later in the day, which could provide fresh insight into consumer spending. A speech from Federal Reserve Chair Jerome Powell is also on the radar.
Analysts believe Powell may remain neutral in tone, especially with recent signs of a rebound in long-term inflation expectations. ING commented, “His commentary looks unlikely to move the needle on market expectations of just 50 basis points in Fed cuts this year.”
Strong U.K. Growth Lifts Sterling
In Europe, the British pound saw modest gains. GBP/USD rose 0.1% to 1.3274 after stronger-than-expected economic growth data from the U.K.
The British economy grew by 0.7% in the first quarter of 2025, a sharp improvement from the 0.1% growth seen in the final quarter of 2024. In March alone, the economy expanded by 0.2% from February, defying expectations for flat growth.
ING analysts expressed confidence in the pound, citing the upcoming U.K.-EU summit on Monday as a potential boost. “More discussion about U.K.-EU alignment should help the pound. With the dollar looking a bit vulnerable, GBP/USD looks biased to the 1.3360/3400 area short term,” they said.
Euro Ticks Up Ahead of Economic Data
The euro also gained slightly. EUR/USD was up 0.2% to 1.1197 ahead of the second estimate of the eurozone’s first-quarter GDP.
ING expects the currency pair to trade within the 1.11–1.15 range in the coming weeks, noting that risks are tilted to the upside. “1.1265 is now decent intra-day resistance,” they added.
Yen Strengthens Ahead of Japan GDP
In Asia, the Japanese yen appreciated against the dollar. USD/JPY dropped 0.6% to 145.87 as investors awaited Japan’s first-quarter GDP data, due Friday.
Meanwhile, USD/CNY edged 0.1% higher to 7.2129 in quiet trading.
The South Korean won saw a sharper move. USD/KRW fell 0.8% to 1396.43 after dropping as much as 2%, following Bloomberg’s report that the U.S. and South Korea had met to discuss exchange rate policies earlier this month.
Summary
The dollar’s recent rally lost steam on Thursday as concerns over U.S. trade strategy and foreign exchange discussions reemerged. With signs pointing to potential policy shifts and upcoming economic data in focus, investors remain cautious. Meanwhile, strong U.K. growth supported the pound, and anticipation of GDP reports moved currencies in Asia and Europe. The coming days could prove pivotal for currency markets around the globe.
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