USD gives back gains amid continued concerns on tariffs

The US Dollar Index has already given back almost all of its gains following the news of the US-China trade deal.

As mentioned, we are not at all convinced that the move is entirely due to the softer April inflation data, but more continued investor concerns surrounding the tariffs. Let’s not lose sight of the fact that the tariffs have not been removed, but merely delayed, and where we go from here remains entirely dependent on upcoming negotiations.

We estimate that the average US tariff rate now stands at around 11-12% following the weekend’s developments (down from north of 20%).

While this is roughly in line with pre-Liberation Day expectations, Trump’s mercurial nature suggests that there’s no guarantee that we continue to go lower from here.

Either way, the lingering uncertainty created by the tariff chaos appears highly likely to dent consumer and investor sentiment, and risks to the US economy remain elevated.

FOMC Chair Powell will no doubt touch on the subject of the economy and the tariffs during his speech on Thursday, where we expect him to maintain his hawkish stance and reiterate that more data will be needed before the Fed changes its stance on rates.