US Dollar Soft as Trade War Fears Creep Up

The US dollar was rather soft due to concerns that potential trade wars between the United States and their allies can damage the US economy. Positive domestic macroeconomic data was unable to bolster the greenback.

Mexico announced that it is going to put tariffs on US products in retaliation to the announcement of US import duties on metals. That should complicate NAFTA talks between the USA, Mexico, and Canada. Additionally, the Group of Seven meets on June 8–9, and debates about protectionism and trade wars will likely be very heated.

Ahead of the meeting, traders focused their attention on tomorrow’s release of the US trade balance. If the deficit shrinks, it should counter accusations made by US President Donald Trump about US allies taking advantage of the United States in unfair trade deals. Conversely, if the deficit widens, it should reinforce Trump’s viewpoint.

EUR/USD slipped from 1.1697 to 1.1652 intraday but bounced to trade at 1.1710 by 19:26 GMT today. GBP/USD rallied from 1.3312 to 1.3386. USD/JPY inched down from 109.81 to 109.71.

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