The US dollar extended its decline in European trading Tuesday, retreating toward six-month lows as escalating US-China trade tensions dampened risk sentiment. The currency’s renewed weakness followed a brief two-day pause, with traders increasingly cautious ahead of Wednesday’s release of Federal Reserve meeting minutes that could provide critical guidance on interest rate policy.
Market participants are closely monitoring how the Fed might respond to growing trade-related economic uncertainties. The minutes could reveal whether policymakers view recent trade developments as warranting a more dovish stance, particularly after China’s threat of retaliatory measures against the latest US tariff threats. This comes as interest rate futures show traders have nearly priced out any chance of a Fed rate hike this year.
Technical charts indicate the dollar index is testing key support levels that, if broken, could accelerate the downward momentum. Currency markets remain particularly sensitive to trade headlines, with the dollar’s safe-haven status being challenged by concerns that prolonged trade tensions may ultimately hurt US growth prospects more than previously anticipated.
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