The U.S. dollar weakened against major currencies during the week ending January 24, driven by softer rhetoric on trade tariffs from the U.S. administration and President Trump’s call for central banks to lower interest rates. Weak U.S. economic data further added to the dollar’s decline.
Dollar Index Experiences Steep Drop
The Dollar Index, a measure of the dollar’s performance against a basket of six major currencies, fell from 109.35 on January 17 to 107.44 on January 24, marking a 1.75% decline—the sharpest since November 2023. The index fluctuated between a high of 109.47 on Monday and a low of 107.22 on Friday.
The dollar’s earlier strength, driven by high tariff expectations, waned on Monday due to the absence of tariff hikes and mixed economic data.
Economic Data Weighs on Dollar
U.S. jobless claims rose to 223,000 for the week ending January 18, exceeding market expectations of 220,000. This was the sharpest rise in six weeks. Meanwhile, the Composite PMI fell to 52.4 in January from 55.4, reflecting declines in manufacturing and services activity.
President Trump’s call at the World Economic Forum for global central banks to lower interest rates further dampened sentiment, raising doubts about the Federal Reserve’s ability to sustain current rate levels.
Currency Movements
- EUR/USD: The pair climbed 2.16% to close at 1.0493, supported by the dollar’s weakness despite expectations of further rate cuts by the ECB.
- GBP/USD: Sterling rose 2.6% to close at 1.2479, influenced by the dollar’s decline and better-than-expected U.K. PMI readings.
- AUD/USD: The Australian dollar gained 1.92%, closing at 0.6309, aided by strong Chinese economic data and easing U.S.-China trade tensions.
- USD/JPY: The pair slipped 0.2% to 155.98, affected by a 25-basis-point rate hike by the Bank of Japan.
Outlook
The Dollar Index opened the new week lower, trading between 107.14 and 107.81 on Monday. Market focus now shifts to upcoming U.S. data, including December Durable Goods Orders, GDP estimates, and inflation readings.
The dollar’s recent decline underscores heightened sensitivity to economic data and global trade developments. While the currency remains under pressure, its performance will depend on key indicators and central bank decisions in the days ahead.