Can Trump’s Trade Pause Fuel a Lasting US Dollar Rebound?
- dollar (primary_keyword) experienced gains against the euro and other currencies,buoyed by strong consumer confidence data and news from Japan.
- Despite President Trump's tariff pause, pressure on the dollar could return.
- Trump's decision to postpone tariffs on the EU initially boosted risk appetite, weighing on haven assets like gold and the yen.
US Dollar Faces Key Test as Tariff Pause Lifts Risk appetite
Updated May 29, 2025
The U.S. dollar (primary_keyword) experienced gains against the euro and other currencies,buoyed by strong consumer confidence data and news from Japan. This momentum carried into the trading session before flattening out. Upcoming U.S. data releases will be crucial in determining if this recovery has staying power. Technically, the dollar index (DXY) is testing resistance between 99.58 and 100.15.
Despite President Trump’s tariff pause, pressure on the dollar could return. Trade tensions have a history of resurfacing, impacting the dollar. Investors are also weighing the long-term viability of U.S. public finances amid erratic policy decisions.
Trump’s decision to postpone tariffs on the EU initially boosted risk appetite, weighing on haven assets like gold and the yen. The declaration followed constructive talks with the European commission. While European stock markets saw a rebound, the U.S. dollar (secondary_keyword_1) also benefited from reduced tariff uncertainty.
the USD/JPY pair substantially influences the dollar index. The yen weakened after reports suggested Japan might reduce long-dated bond issuance, causing a dip in long-term yields. Concerns about rising yields have been mounting, and the hope is that reducing supply will support bond prices.
U.S. consumer confidence (secondary_keyword_2) data surprised,with the Conference Board’s report showing a strong increase to 98.0, exceeding expectations. This further fueled dollar appreciation.
For the dollar to maintain its strength, upcoming data must alleviate recession fears. Deficit anxieties are beginning to erode the currency’s stability. Doubts about U.S. creditworthiness could persist, especially if Treasury auctions reflect weak investor demand.
Later in the week, markets anticipate preliminary GDP, durable goods orders, and pending home sales data. Friday will bring the Personal Consumption Expenditures Price Index, personal spending and income figures, and the revised university of Michigan consumer sentiment index.
The dollar index is currently testing a key resistance area between 99.58 and 100.15,a zone of previous support and resistance. As long as this area holds, the path of least resistance for the DXY remains downward. A break above this zone with follow-through would improve the dollar’s technical outlook. Support is seen around 99.00, with the April low of 97.92 as the next focus.
What’s next
Traders will closely watch upcoming economic data releases and any further developments in trade negotiations to gauge the U.S. dollar’s next move.