FX.co ★ Dollar Pressured by Fears of Tariff-Induced Recession

The US dollar index remained below 102 on Friday following a nearly 2% drop in the previous session. This decline was driven by heightened concerns that President Donald Trump's aggressive tariff policies, along with potential retaliatory measures from major trading partners, might lead to a global economic downturn. Trump declared a foundational 10% tariff on all imports effective April 5, with more substantial tariffs imposed on approximately 60 countries. These include China at 54%, the European Union at 20%, Japan at 24%, India at 27%, and Vietnam at 46%. In response, markets adjusted expectations for higher inflation, slower economic growth, and additional interest rate cuts by the Federal Reserve. Currently, traders are forecasting four 25-basis-point rate cuts from the Fed this year, with the first anticipated in June. Subsequently, Trump indicated a willingness to enter trade discussions, diverging from earlier statements made by his aides. Investors are now looking ahead to Friday’s US employment report, which may further influence expectations regarding the Fed’s impending actions.