Dollar Holds Ground as Traders Await PCE and New Tariffs

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The dollar was set to end the week relatively steady, but it faces a quarterly loss as concerns over tariffs dampen U.S. growth expectations, leading to a drop in U.S. yields, stocks, and the currency.

The euro, trading just below $1.08, was poised for its largest quarterly gain in over a year, rising more than 4% since the start of 2025. This was driven by improving peace prospects in Ukraine, the dollar's weakness, and a significant increase in benchmark German yields. The yen also showed slight strength, heading for a quarterly gain of nearly 4%, at 151.19 per dollar, largely unaffected by persistent inflation in Tokyo.

Among the best performers in the G10, Scandinavian currencies have been leading, with Sweden up nearly 11% and Norway gaining almost 9%, as central banks in these countries appear in no rush to lower rates further.

On Friday, France and Spain will release preliminary inflation data, and the U.S. will report February figures for the Federal Reserve's preferred core PCE inflation measure. If these figures come in softer than the expected 0.3% month-on-month rise, it could put additional downward pressure on the dollar and U.S. interest rates.

However, markets are cautious ahead of U.S. President Donald Trump's announcement of new tariffs next week, which could affect trade sentiment heading into the weekend. Trump had already revealed that a 25% levy on imported cars would take effect on April 3.

The dollar's decline in recent months has defied expectations for a stronger U.S. currency under Trump’s tariffs, causing traders to liquidate long dollar positions and leaving them uncertain about how to respond to his shifting trade policies. Despite this, the Canadian dollar has risen around 0.5% to C$1.4306 per dollar this year, despite enduring heavy U.S. tariffs. The euro might face pressure if Trump turns his focus to Europe next week.

"If broad-based tariffs are imposed on the EU, we expect the EU to retaliate with countermeasures," said Peter Dragicevich, currency strategist at Corpay. "If this happens, the euro could lose some ground."

The Australian dollar was steady at $0.6291 and on track for a 2% quarterly rise, trading within a range it has held since December. Next week, the Reserve Bank of Australia’s new monetary policy board, which includes two new members, will meet for the first time, but no rate change is expected.

The New Zealand dollar remained stable at $0.5728, also on track for a quarterly gain of around 2.5%.

Sterling, at $1.2943, held steady during the Asia session and was set for a 3.5% gain so far this year.

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author