The U.S. dollar saw slight gains on Wednesday as investors assessed uncertainty surrounding the economic outlook and speculation over upcoming U.S. tariffs.
President Donald Trump has threatened to introduce a new round of tariffs on autos, chips, and pharmaceuticals next week, though the details remain unclear.
British markets remained under scrutiny as Finance Minister Rachel Reeves prepared to announce spending cuts later in the day, an effort to convince investors of her commitment to stabilizing public finances amid sluggish growth. Data showed that British inflation slowed to an annual rate of 2.8% in February from 3.0% in January.
The pound weakened following the report, slipping to $1.2908 as investors weighed the possibility of interest rate cuts by the Bank of England. Money markets indicated an increasing likelihood of rate reductions, pricing in a 25-basis-point cut in August and a strong chance of an earlier move in June.
The euro declined to $1.0776 after retreating from a five-month high reached earlier in March. Germany’s fiscal expansion plans had initially boosted the currency, but recent data indicated increased selling pressure from sovereign wealth funds and central banks against the dollar.
The shift signaled skepticism about the idea that the U.S. economy is losing momentum while Europe’s economic prospects improve.
The dollar remained above 150 yen after briefly dipping below that level, with markets bracing for further trade policy announcements from Washington. The Australian dollar hovered slightly above 63 cents after consumer inflation data for February came in softer than expected.
In emerging markets, Turkey’s lira steadied just below 38 to the dollar after government officials reassured investors that steps would be taken to address recent market volatility. Concerns had intensified following the arrest of President Tayyip Erdogan’s main political rival, which triggered unease among foreign investors.
U.S. consumer confidence data released on Tuesday showed sentiment had fallen to its lowest level in more than four years, reflecting how economic uncertainty is weighing on households. Meanwhile, the dollar index remained up 0.05% at 104.28 but was still on track for a 4% drop for the quarter after a strong rally from September to January.
