FX.co ★ DXY Holds Sharp Pullback

On Wednesday, the dollar index experienced a further decline, reaching the 97.4 mark, as investors processed recent changes to U.S. trade policy. Reports indicated that tariffs on the European Union are set to be reduced to 15%, down from previously threatened 30%. If implemented, this adjustment aligns with the recent reduction in tariffs for Japan, after their new trade agreement, while Japan has committed to enforcing a 15% tariff on exports to the U.S. Additionally, Japan will invest $550 billion in the United States. Although these developments support U.S. economic growth, the unchanged capital flows with Japan and strengthened euro, fueled by trade rumors, have limited the dollar's support, as measured by the DXY. In further developments, Treasury Secretary Bessent suggested that the ongoing tariff truce with China might be extended beyond its August 12th expiration date. On the monetary policy front, minutes from the latest Federal Open Market Committee (FOMC) meeting indicated that several members view tariffs as potentially inflationary, which has led the Federal Reserve to pause further interest rate cuts for the time being.