The US Dollar Index (DXY) rebounded from a two-week low of 97.72 to trade around 98.21 on Friday, though it remains on track to close the week in negative territory after a volatile period driven by suspected Japanese intervention, Middle East tensions, and renewed trade concerns [1][4]. US President Donald Trump threatened to raise tariffs on European automobile imports to as high as 25%, offsetting earlier improvements in risk sentiment and pressuring the Euro, with EUR/USD trimming gains to trade near 1.1730 [1][3]. Trump also expressed dissatisfaction with Iran's latest peace proposal, stating, “we made strides in talks with Iran, but I'm not sure we're going to get to a deal,” and highlighting that Iran is asking for terms he is not comfortable agreeing with [3].
Japanese authorities intervened in the FX market on Thursday, spending up to $35 billion USD, which initially drove the US Dollar lower, pushing the DXY towards two-week lows before a modest recovery to 98.07, down 0.03% on the day [4]. Gold (XAU/USD) extended its rally, rising over 0.50% to $4,643, as the weaker Dollar and news of Iran's proposal weighed on oil prices, with WTI crude falling over 3% to $101.91 per barrel [4]. However, analysts such as Alexander Kuptsikevich of FxPro noted that gold is struggling to capitalize on Dollar weakness due to expectations of tighter US monetary policy and the appeal of government bonds [4].
The US ISM Manufacturing PMI for April held steady at 52.7, narrowly missing the 53.0 consensus, while the Employment Index dropped to 46.4 and the Prices Paid component surged to 84.6, the highest since April 2022 [2][4]. In Canada, the S&P Global Manufacturing PMI jumped to 53.3 from 50.0, supporting the Canadian Dollar and contributing to a 0.6% weekly slide in USD/CAD, which steadied near 1.3590 after earlier lows [2].
The Federal Reserve kept rates unchanged at its latest meeting, though the decision was not unanimous. Dissenting members cited concerns over inflationary pressures from higher oil prices and potential disruptions in the Strait of Hormuz, with some suggesting the next move could be either a rate hike or cut depending on future developments [4]. Money markets expect the Fed to keep rates unchanged throughout the year [4]. Looking ahead, markets are focused on next week's US Non-Farm Payrolls (NFP) report, with consensus at 73K versus 178K previously, and Canadian employment data, with the unemployment rate expected to remain at 6.7% [2][4].
CONCLUSION
The US Dollar rebounded from recent lows amid renewed tariff threats and ongoing geopolitical uncertainty, but remains under pressure from Japanese intervention and mixed US economic data. Market sentiment is cautious, with investors awaiting key US employment figures and further developments in trade and Middle East negotiations. The outlook for the Dollar and related assets remains volatile as policy and geopolitical risks persist.