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The U.S. dollar hovered near multi-year lows on Friday, pressured by expectations of deeper Federal Reserve rate cuts and uncertainty surrounding global trade negotiations ahead of a key July 9 deadline for new tariffs.
Traders are increasingly pricing in dovish shifts from the Fed, with markets now expecting 64 basis points of rate cuts in 2025, up from 46 basis points earlier in the week. Recent congressional testimony from Fed Chair Jerome Powell was seen as more dovish, fueling speculation that President Donald Trump may announce a new Fed Chair as early as September or October—months ahead of Powell’s term ending in May.
Reports suggest Trump is considering replacing Powell to install a more rate-cut-friendly leader. Though no decision is final, such a move could undermine Powell’s authority and introduce volatility into markets, especially if the nominee voices contrasting views.
The dollar index (DXY) was at 97.378, its lowest since March 2022, and is on track for a 2% loss in June—marking six consecutive months of decline. The euro traded at $1.1693 after touching a 2021 high of $1.1745, while the British pound held near $1.3733. The Swiss franc stood at 0.8013, its strongest level in a decade, and the yen slipped slightly to 144.73 per dollar.
Meanwhile, global trade remains in focus. German Chancellor Friedrich Merz urged the EU to pursue a “quick and simple” deal with the U.S., while a White House official confirmed progress with China on accelerating rare earth shipments. These developments come as nations rush to finalize trade agreements before the upcoming U.S. tariff deadline.
The weakening dollar reflects both policy uncertainty and mounting investor concerns over U.S. economic momentum.
