The dollar fell as optimism about US trade agreements increased, which strengthened expectations of early interest rate cuts by the Federal Reserve

The US dollar witnessed a noticeable decline against major currencies at the beginning of trading on Monday, influenced by rising optimism in the markets about reaching trade agreements between the United States and China, which strengthened expectations that the Federal Reserve will cut interest rates soon.

Pressure on the dollar as trade prospects improve

The dollar reached four-year lows against the euro and the British pound, and also fell to the lowest level in more than a decade against the Swiss franc, amid signs that the White House is nearing a trade deal with China.

It also fell against the Japanese yen, as investors interpreted Federal Reserve Chairman Jerome Powell's statements to Congress last week as a signal of a possible easing of monetary policy if inflation does not register a significant rise due to tariffs.

Strong expectations of interest rate cuts

Market expectations of an interest rate cut of at least 25 basis points by September rose to 91.5%, according to FedWatch tool, compared with 83% a week ago.

The Fed is scheduled to hold its next meeting in July, but it will not meet in August, which increases the likelihood of an early decision.

Trump's attack on Powell increases pressure

US President Donald Trump continued his criticism of Jerome Powell, stating on Friday that he would be pleased with the resignation of the head of the Federal Reserve before the expiration of his term next May.

Trump also reiterated his desire to reduce the benchmark interest rate to 1%, instead of its current level between 4.25% and 4.5%, threatening to replace Powell with an official more inclined to monetary easing.