“One day you have tariffs, the other you don’t,” said Zain Vawda, an analyst at forex consultancy Oanda. “These constant policy changes are hurting the dollar.”<\/p>\n
Unprecedented volatility has encouraged traders to move away from the U.S. and buy the euro, the British pound and Swiss franc, he said.\u00a0<\/p>\n
And as Washington eyes two to three rate cuts this year, the de-dollarization trend is expected to stick around for some time, potentially boosting top G10 pairs such as the EUR\/USD, CHF\/USD and CAD\/USD, Vawda said.\u00a0<\/p>\n
The euro, the most heavily traded currency against the dollar, could see gains amid a strengthening European economy, a large stimulus package and expectations that interest rate cuts will be more moderate than in the U.S.<\/p>\n
On July 27, the U.S. and the EU signed a long-awaited trade deal that will see the EU pay a 15% tariff to sell its goods to the U.S., down from the much higher 30% that was initially proposed. The announcement saw the dollar gain about 1.2% on the day, though it’s still down roughly 13% this year.\u00a0<\/p>\n
Mark Connors of financial consultancy Riskdynamics doesn’t expect the deal, alongside a Japan trade accord struck on July 23, to significantly boost the dollar until more acute risks are addressed.<\/p>\n
“These agreements remove tariff uncertainty,” said Connors. “But we still have a massive budget deficit and debt crisis.\u201d<\/p>\n
Amid ongoing uncertainty, the dollar\u2019s performance could become a headwind or tailwind for other top currencies:<\/p>\n