Insights 
VT 
The US Dollar Index (DXY) experienced a decrease, falling below 99.50 and plummeting 1.8% for the week. This drop occurred amid increasing risk aversion and threats from US President Donald Trump regarding tariffs; these include a 50% tariff on EU goods and a 25% tariff on Apple products produced overseas.
Trump’s aggressive trade rhetoric rekindled fears of a trade conflict, affecting global markets. The tariff threat came just before trade discussions between the US and the EU, with Trump stating the new tariffs will start on 1 June.
Economic Impact Of Proposed Tariffs
Estimates suggest these tariffs could reduce EU exports to the US by 20%. Looking ahead, attention will turn to upcoming economic data and policy signals from Fed officials to gain insight into the US economic outlook.
Currently, the US Dollar is performing weakest against the Euro. In the currency exchange context, calculations reflect a range of changes for major currencies against each other, with the US Dollar showing a decline across the board against those listed.
The US Dollar is the world’s most traded currency and relies heavily on the Federal Reserve’s monetary policy actions. Quantitative easing and tightening by the Fed have substantial impacts on the Dollar’s strength.
The recent sharp drop in the US Dollar Index (DXY), which slipped below the 99.50 mark and registered a weekly fall of 1.8%, reflects more than just trader sentiment—it underscores how sensitive pricing has become to external policy cues. This decline unfolded in tandem with increased appetite for safety, particularly as American President Trump reignited tariff threats, which in turn rattled sentiment across international markets. In his statement, he outlined intentions for a 50% levy on EU goods and a 25% tax on Apple products made abroad, with implementation earmarked for the first of June.
These remarks arrived just as trade delegates from the United States and the European Union prepare to resume discussions. The timing here is unlikely to be coincidental. With preliminary models forecasting a potential 20% contraction in EU exports to the US, expectations are widening for possible countermeasures from Brussels. Traders watching Euro-based assets are likely to weigh these risks early in the next cycle.
Shifting Currency Dynamics
The Euro, in the short-term at least, has been the main beneficiary of USD weakness. As the Dollar slipped back, Europe’s single currency gained traction, driven mostly by repositioning and possibly by speculative covering. Dollar softness was not isolated—it was visible across the whole G10 spectrum, as correlations spread through risk-sensitive asset classes. Among developed currencies, the Yen and Swiss Franc each saw shallow appreciation as well.
With the central bank’s actions often serving as the reference point for US Dollar pricing, attention now shifts to upcoming comments from FOMC members. We’ll want to dissect not just headline guidance but the undertones—any shift in tone on employment, inflation risks, or balance sheet intentions could be the signal that drives short-term volatility on future rate pricing.
What matters most in the next two weeks is how much of this move reflects a durable shift in policy expectations versus an overshoot driven by geopolitics. If futures markets begin to pare back their outlook for further hikes—or even start to entertain loosening—that could extend Dollar selling well into June.
Looking at positioning, open interest in downstream derivatives has already stretched towards increased long-Euro/short-Dollar bias. Those holding these exposures should monitor liquidity conditions during overlapping EU-US trading hours, especially approaching headline-driving data. The risks here are not one-sided—should sentiment swing or tariffs be walked back, the unwind could be aggressive.
We are watching for fresh CPI and NFP prints, as these will offer the next challenge to the current directional assumption. Any upside surprise in inflation data in particular would likely revive the case for a more hawkish Federal Reserve stance, potentially halting or even reversing this Dollar drift. The market’s current tilt rests on assumptions of further global dislocation—it wouldn’t take much to shake that.
Portfolio hedging around key event risk windows, especially including the next major central bank meeting and post-payroll data reactions, seems warranted. For now, volatility premiums on weekly options remain elevated relative to averages, reflecting uncertainty around both trade negotiations and domestic economic signals.
We continue to track whether the risk-off momentum seen over recent sessions builds into something more persistent, or whether it’s just a short-term shakeout. In the meantime, holding flexibility in direction and duration, and reducing leverage around catalyst events, appears a practical path forward.
