US Dollar Weakens as Tariff Fears Mount, Trade Tensions Escalate

The US Dollar is experiencing significant pressure, poised for its worst week in over a year due to escalating trade tensions and disappointing economic data. The dollar index fell to a four-month low, exacerbated by a record trade deficit and a stronger euro as the European Central Bank signals less restrictive rates. Concerns are growing regarding the impact of US tariffs on imports from Canada, Mexico, and China, which have prompted retaliatory measures and fears of slowing economic growth. Analysts note that the combination of tariffs and weak economic indicators could lead to recession or stagflation. Market attention is now focused on upcoming economic reports, including nonfarm payroll data, which could influence Federal Reserve policy. The recent downturn in the dollar reflects broader investor sentiment shifting away from US assets amid fears of prolonged inflationary pressures.