The US dollar fell to the lowest level in a month with the postponement of tariffs on the European Union

The US dollar witnessed a significant decline on Monday, May 26, 2025, as the dollar index (DXY) fell below the level of 99 points to 98.75, marking its lowest level in more than a month.

This decline comes on the heels of US President Donald Trump's decision to postpone the imposition of 50% tariffs on EU imports until July 9.

Details of the decision and its direct impact

Trump announced the postponement decision via his truth social platform after a phone call with European Commission President Ursula von der Leyen, who described the conversation as good, but noted the need for more time to reach a mutually satisfactory agreement.

This decision came after days of direct threats to impose tariffs starting from June 1, which had triggered a wave of anxiety in global markets.

Despite this postponement, which was expected to relieve some pressure on the dollar, the US currency continued its decline due to two main factors:

- New threats to impose 25% tariffs on iPhones that are not manufactured domestically in the United States, raising fears of escalating trade tensions with other partners.

- Trump's statements about the possible revision of his comprehensive spending proposal and tax cuts in the Senate, which increased the uncertainty in the markets.

Market reactions and economic analysis

The euro rose against the dollar following this decision, as market traders saw that the postponement of tariffs may temporarily ease trade tensions between the two largest economic blocs in the world, however, the dollar remains under severe pressure due to the fluctuations of Trump's trade policy, which weakened investor confidence in US assets, and US consumer confidence fell to its lowest levels, as the University of Michigan reported that the preliminary confidence index fell to 50.8 compared to 54.5 estimates.

The broader landscape of the US dollar

The US dollar is witnessing a continuous decline for the fifth week in a row, as the indicator lost the important psychological 100 level and maintained its activity around the lows it has experienced for three years.

Contributing factors to this vulnerability include:

- Losses in US Treasury bond yields accelerate across different time frames.

- Fears of an inflationary recession that negatively affect the public mood towards the US currency.

- Statements by Fed officials that indicated a decline in consumer and business confidence due to changes in US trade policy.

What are the future forecasts

With inflation still above the Fed's 2% target, tariffs disrupting global trade flows, and political noise blurring the picture of monetary policy, it seems that the US dollar is headed for more volatility in the coming period.

Technically, the dollar index is trading below the simple moving averages (moving averages) for 50, 100 and 200 days, which indicates a continuation of the downward trend.