The U.S. dollar strengthened broadly on Friday, while the euro continued to retreat from a five-month high as global trade tensions and economic slowdown fears weighed on markets.
Adding to market volatility, U.S. President Donald Trump threatened a 200% tariff on European wine, cognac, and other alcoholic imports. This escalation followed the EU’s plan to impose levies on American whiskey and other products in response to the U.S. imposing 25% tariffs on steel and aluminum earlier in the week.
The intensifying trade dispute heightened uncertainty, driving investors toward safe-haven assets like U.S. Treasuries. The S&P 500 slipped into correction territory on Thursday as risk sentiment weakened. The euro edged down to $1.0847 after pulling back from Tuesday’s five-month high, weighed down by trade concerns and Germany’s struggles to pass a major spending package.
Meanwhile, hopes for a Ukraine-Russia ceasefire faded as Moscow expressed conditional support for a U.S.-proposed plan, indicating significant revisions would be necessary.
The dollar rebounded from a mid-October low of 103.21, though concerns about the broader U.S. and global economic outlook persisted. Market analyst Tony Sycamore noted that uncertainty remains high, with no clear catalyst for shifting risk sentiment.
Since reaching a six-month peak in January, the dollar has fallen over 5% against major currencies, as cracks emerged in the U.S. economic exceptionalism narrative. Further uncertainty loomed with a potential U.S. government shutdown, though Senate Majority Leader Chuck Schumer signaled bipartisan support for a stopgap funding bill.
The British pound hovered around $1.2945 ahead of January’s GDP report, down from Wednesday’s high of $1.2990.
Wage Negotiations and Market Reactions
The yen retraced some of its gains, with the dollar rising to 148.32 yen, up 0.35%. Earlier in the week, the Japanese currency had strengthened to 146.545 per dollar on safe-haven demand and speculation that the Bank of Japan (BOJ) might raise interest rates later this year. Markets awaited the results of spring wage negotiations, which could influence BOJ’s monetary policy stance ahead of its meeting next week.
The dollar index, measuring the greenback against a basket of major currencies, edged up 0.1% to 103.95 after two consecutive days of gains.
Elsewhere, the Canadian dollar struggled at 1.4440 per U.S. dollar amid trade tensions, while the risk-sensitive Australian dollar stabilized at $0.6284. The New Zealand dollar ticked up 0.1% to $0.5702.
In the cryptocurrency market, Bitcoin rose 1.32% to $81,410.36.
