The U.S. dollar weakened on Thursday as signs emerged that President Donald Trump might take a softer stance on tariff negotiations, while expectations for Federal Reserve rate cuts grew. Trump said on Wednesday he would consider extending the July 8 deadline for trade talks before higher tariffs are imposed. Earlier, Treasury Secretary Scott Bessent suggested the administration might grant extensions to countries negotiating in good faith.
These comments weighed on the dollar, pushing the euro to a seven-week high near $1.1525. The dollar fell 0.43% against the yen to 143.98 and 0.34% versus the Swiss franc at 0.81725. Against a currency basket, it dropped to its lowest since late April at 98.327.
“It’s hard to tell whether there is a masterplan behind this, but common sense would suggest that President Trump is trying to create a level of urgency in terms of trade negotiations,” Rodrigo Catril, senior currency strategist at National Australia Bank, said.
The pound rose 0.38% to $1.3588, while the Australian and New Zealand dollars gained slightly. U.S. consumer prices rose less than expected in May, increasing bets on a Fed rate cut as soon as September and adding pressure on the dollar. Markets now await Thursday’s producer price index data for further inflation clues.
The offshore yuan edged stronger to 7.1953 per dollar amid reports of a fragile U.S.-China trade truce after London talks, though Westpac’s Mantas Vanagas noted, “Full details have not been published, and it remains unclear if the talks brought the two largest economies closer to productive cooperation.”
The euro held firm, trading near 165.88 against the yen and reaching a one-month high of 84.88 pence. Analysts link its strength to hawkish signals from the European Central Bank, which hinted at pausing its easing cycle after inflation hit the 2% target.
Carol Kong of Commonwealth Bank of Australia said, “Expectations of fewer previously expected ECB rate cuts have lent some support to the euro.”
This contrasts with the likely Fed easing later this year, supported by Trump’s calls for lower US rates. Trump also stated a decision on the next Fed chair would come soon, adding, “a good Fed chair would lower interest rates.”