Dollar Slides Amid Fears Over Economic Impact of Trump’s Tariff Moves

The U.S. dollar dropped sharply as concerns mounted over the potential impact of Donald Trump’s trade war on the American economy.

The greenback fell 1% against the pound, which climbed to $1.296, and slid 1.5% versus the euro, reaching $1.113.

Investors have been rattled by fears that Trump’s aggressive tariff strategy could tip the U.S. into a downturn. Goldman Sachs now places the likelihood of a recession at 45%, while bond giant Pimco has put the odds at an even 50/50.

The dollar’s decline was further fueled by official data showing U.S. inflation eased more than expected last month, falling from 2.8% to 2.4%. The slowdown has increased market speculation that the Federal Reserve may cut interest rates significantly in the months ahead.

Wall Street opened lower on the back of the news, with both the S&P 500 and the Nasdaq Composite falling more than 2%.

Chris Turner, head of FX strategy at ING, commented: “Trying to predict the President’s next move has proved painful for many. Ultimately, we expect he’ll get what he wants—a broadly weaker dollar—but that’s more a story for later in the year and into 2026.”

The euro’s rise also came as the European Union extended an olive branch to Washington, announcing a 90-day delay in its planned counter-tariffs in response to Trump’s trade U-turn.

European Commission President Ursula von der Leyen said the EU would suspend its retaliation to the 25% metal tariffs imposed by the Trump administration earlier this year, following his decision to pause reciprocal tariffs on all nations except China.

“We want to give negotiations a chance,” von der Leyen stated.

FTSE 100 Soars in Fastest Rally in Five Years as Global Markets Surge on Tariff Pause

The FTSE 100 posted its sharpest rise in five years on Thursday, as global markets rallied in response to President Trump’s surprise decision to suspend new tariffs for 90 days.

Britain’s leading stock index jumped as much as 6.3% at the open, rebounding strongly after Trump’s unexpected reversal late Wednesday—just a day after sweeping new tariffs had taken effect for most U.S. trading partners.

In the U.S., the S&P 500 recorded its third-best day since 1940, closing 9.5% higher. The relief rippled across Asia, with Japan’s Nikkei index soaring 9.1% by the close.

European markets followed suit. The pan-European Stoxx 600 index, which includes UK-listed companies, surged 7.3%—its biggest one-day gain since March 2020.

France’s CAC 40 jumped as much as 7.6%, while Germany’s DAX climbed up to 8.3%, as investors welcomed the de-escalation in global trade tensions.