The Dollar Drops to Its Lowest Level in 2025 Amid Economic Data and Tariffs

The dollar declined to its lowest level in 2025 due to weak economic data and uncertainty surrounding tariff policies,
increasing pressure on the U.S. currency amid expectations of interest rate cuts.

Contents

The Dollar Index Declines Amid Weak Data
The Euro Continues to Gain Amid Trade Uncertainty
Decline in Bullish Bets on the Dollar
Increasing Pressure on the Dollar
Future Market Expectations for the Dollar

The Dollar Index Declines Amid Weak Data

The dollar fell to its lowest level this year, affected by weak retail sales data and ongoing uncertainty regarding U.S. tariff policies, raising doubts about the currency’s ability to gain further.
The Bloomberg Dollar Spot Index dropped by 0.5% on Friday, reaching its lowest level during the session, after weaker-than-expected January retail sales data reinforced expectations that the Federal Reserve might cut interest rates more aggressively than previously anticipated.

The Euro Continues to Gain Amid Trade Uncertainty

Meanwhile, the euro continued its upward momentum for the fourth consecutive day, reaching a three-week high, supported by comments from U.S. President Donald Trump regarding tariffs, which did not include any immediate measures against Europe.
The dollar also faced additional pressure due to ongoing uncertainty in U.S. trade policies, which has weakened confidence in the currency despite its recent highs earlier this month.

Decline in Bullish Bets on the Dollar

Data from the Commodity Futures Trading Commission (CFTC) revealed that speculative traders have reduced their bullish bets on the dollar for the fourth consecutive week. Net long positions fell by $4.7 billion to $26.5 billion, according to Bloomberg data.

Increasing Pressure on the Dollar

Technical indicators monitored by JPMorgan have turned bearish on the dollar,
reflecting “market fatigue from tariff concerns more than any other factor.”
Wayne Thinn, Head of Global Markets Strategy at Brown Brothers Harriman,
stated that the sharp decline in January retail sales—the largest in nearly two years
—could lead the Federal Reserve to cut interest rates by 50 basis points in 2025,
adding further pressure on the dollar in the near term.

Future Market Expectations for the Dollar

Despite the recent decline, some analysts still expect the dollar to remain strong in 2025,
especially if trade tensions escalate.
Goldman Sachs strategists indicated that the dollar’s continued strength depends on the scale and speed of a potential second trade war, predicting that the currency would maintain high levels unless there are significant shifts in economic policies.
Meanwhile, a survey conducted by Bank of America among more than 50 global fund managers found that nearly half of them expect the dollar to peak in the first quarter of this year.
Their evaluations suggest that narrow interest rate differentials could become a key headwind for the U.S. currency moving forward.

The Dollar Drops to Its Lowest Level in 2025

The Dollar Drops to Its Lowest Level in 2025

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