The dollar moved toward its strongest weekly performance in nearly three years against major currencies, maintaining its momentum on Friday after President Donald Trump imposed new tariffs on dozens of trade partners.

Currencies of heavily impacted countries saw sharp declines, such as Switzerland, which now faces a 39% tariff. The Swiss franc dropped to its lowest level in six weeks, while the Canadian dollar headed for a seventh straight weekly loss.

The dollar also rose against other currencies for reasons unrelated to tariffs. The Japanese yen posted its worst weekly performance of the year after the Bank of Japan hinted it was not ready to resume interest rate hikes, prompting Finance Minister Katsunobu Kato to state on Friday that officials were "concerned" about the yen’s movements.

The US monthly jobs report is also scheduled for release on Friday, expected to show that 110,000 jobs were added to the labor market in July.

Much of the dollar’s strength this month stems from investor belief that Trump’s tariffs have not negatively impacted the US economy or caused a sharp spike in inflation.

Despite Trump’s pressure on Federal Reserve Chair Jerome Powell to cut interest rates, the US central bank has indicated it is in no rush. According to IG’s chief analyst Chris Beauchamp, Friday’s jobs report is unlikely to shift that stance significantly, even if the numbers come in weaker than expected, as it may only trigger some selling in US assets like the dollar.

Beauchamp said: “Fundamentally, the US economy is still in decent shape—not at its peak, but tariffs will have limited impact. The market looks exposed to short-term selling, simply as an excuse for profit-taking and waiting to see what happens.”

He added: “A large amount of weak economic data would need to be released between now and September for rate cut expectations to be revived.”

The dollar index, which measures the US currency’s performance against a basket of six major peers, has risen 2.4% this week—its best weekly performance since a 3.1% gain in September 2022. The index last rose 0.1% to 100.13, its highest level since late May.

Tariff impact

The Swiss franc, typically viewed as a safe haven, lost its usual standing, declining against a range of currencies amid a broad sell-off in equities and commodities in response to the high tariffs imposed by Trump. The US president also demanded that pharmaceutical companies—one of Switzerland’s key exports—cut drug prices for American consumers.

The dollar rose by as much as 0.6% to 0.8173 francs, its highest level in six weeks, while the euro gained 0.5% to trade at 0.932 francs.

The yen, another traditional safe-haven currency, posted slight gains against the dollar, with the greenback down 0.15% to 150.545 yen after touching its highest levels since late March.

The US dollar continued advancing against the Canadian dollar, up 0.13% to 1.38735, after the US imposed 35% tariffs on Canadian imports—up from the previously threatened 25%.

The euro remained near its two-month lows at $1.1408, still affected by what markets view as an unbalanced trade agreement with Washington.

Mike Holahan, Managing Director at Electus Financial in Auckland, said: “In the short term, there’s room for more dollar strength.” He added: “The bulk of the tariff news has been priced into the market.”

He continued: “This week’s big move was the repricing of the euro lower. The net result is that the trade deal between the EU and the US now stands as an added headwind for the euro.”

The EU–US framework trade agreement announced on Sunday was quickly criticized by French leaders and the European Parliament’s trade committee chair, who viewed it as unfair to Europe.

Gold prices declined in European markets on Friday, resuming losses that had paused the previous day, and are on track to test a four-week low. The metal is heading for a third consecutive weekly loss due to the strong performance of the US dollar against a basket of major currencies.

The drop comes in the wake of a more hawkish-than-expected Federal Reserve policy meeting, which reduced the likelihood of a rate cut in September. Markets now await the release of the US nonfarm payrolls report later today to reassess the Fed’s next steps.

Price Overview

Gold fell by 0.25% to $3,281.84 an ounce, down from the session’s opening at $3,289.84. The intraday high stood at $3,300.41. On Thursday, gold rose 0.45%, rebounding from a four-week low of $3,268.89.

For the month of July, gold lost around 0.4%, marking its first monthly decline of 2025, driven by reduced safe-haven demand and profit-taking from record highs.

Weekly Performance

Gold is down approximately 1.7% so far this week, on pace for a third straight weekly loss.

US Dollar Strength

The dollar index rose 0.1% on Friday, extending gains for a seventh consecutive session to reach a two-month high of 100.16. The rally reflects ongoing dollar strength amid reduced recession fears in the US, following recent trade deals with Japan and the EU, and stronger economic data.

Federal Reserve Outlook

As expected, the Fed left interest rates unchanged on Wednesday, holding the target range at 4.25%–4.50% for the fifth straight meeting.

The Fed stated that inflation and unemployment risks remain elevated amid economic uncertainty. Fed Chair Jerome Powell remarked that future policy steps will likely remain neutral and noted potential inflationary effects from new tariffs.

Interest Rate Expectations

According to CME’s FedWatch tool, the probability of a 25 basis point cut in September dropped from 64% to 43% following the Fed meeting. Odds of holding rates steady rose from 34% to 57%.

Expectations for a rate cut in October also fell—from 78% to 64%—while chances of no change increased to 36%. Traders now anticipate only about 35 basis points in total easing by year-end, down from prior estimates.

Jobs Report in Focus

Markets await the July nonfarm payrolls report at 13:30 GMT for fresh guidance on rate policy. Forecasts point to 106,000 new jobs versus 147,000 in June, with unemployment expected to rise to 4.2% from 4.1%. Average hourly earnings are seen increasing 0.3%, up from 0.2% last month.

Outlook for Gold

Marex analyst Edward Meir noted that gold has been trading between $3,250 and $3,450 for nearly two months, and may now breach the lower bound due to dollar strength fueled by the Fed’s hawkish stance.

He added that failure to renegotiate tariffs could reignite trade tensions and lift gold prices again. However, FX News Today expects that stronger-than-expected jobs data would further lower rate-cut odds and potentially push gold below $3,250 an ounce.

SPDR Gold Trust Holdings

Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 0.86 metric tons on Thursday—marking a second consecutive daily decline—to 954.51 metric tons, the lowest level since July 21.

Preliminary estimates released Friday morning by Eurostat showed that the Eurozone's annual Consumer Price Index (CPI) rose by 2.0% in July, surpassing market expectations of a 1.9% increase and matching the previous reading of 2.0%.

Excluding food and energy, core CPI rose by 2.3%, in line with market forecasts and unchanged from the previous reading.

These figures highlight persistent inflationary pressures facing European Central Bank policymakers, reducing the likelihood of a 25-basis-point rate cut in September.

The euro rose in European markets on Friday against a basket of major currencies, extending its recovery for a second consecutive session after hitting a two-month low versus the US dollar. The gains were driven by dip-buying at lower levels.

This rebound comes ahead of the release of key eurozone inflation data for July, which is expected to shed more light on whether the European Central Bank (ECB) will raise interest rates in September.

Despite the current uptick, the single European currency remains on track for its steepest weekly loss since 2022 due to strong opposition from France and Germany against the recent US–EU trade agreement.

Price Overview

• EUR/USD rose by 0.15% to $1.1429, up from the day’s opening price of $1.1412, after hitting an intraday low of $1.1405.

• On Thursday, the euro gained 0.1% — its first daily gain in six sessions — recovering from a two-month low of $1.1400.

• Over the month of July, the euro fell 3.2% against the dollar, marking its first monthly loss since December 2024. The decline was driven by profit-taking from the 4-year high at $1.1830, along with fears that the new US–EU trade deal could spark an economic slowdown in the eurozone.

ECB Interest Rate Outlook

• The ECB kept its key interest rates unchanged at 2.15% last week — the lowest level since October 2022 — following seven consecutive rate cuts.

• The bank opted to pause its monetary easing cycle, awaiting more clarity on future US–EU trade relations.

• ECB President Christine Lagarde stated after the meeting: “We are in a wait-and-see mode,” and added that the eurozone economy has shown resilience despite global uncertainties.

• According to Reuters sources, a clear majority of ECB members preferred to keep rates unchanged at the upcoming September meeting — which would mark a second consecutive pause.

• On Thursday, German inflation figures came in higher than expected for July, potentially signaling renewed inflationary pressures that could influence ECB policy.

• Current money market pricing suggests less than a 30% chance of a 25 basis point rate cut by the ECB in September.

Eurozone Inflation Data

To reassess the policy outlook, investors are now awaiting July’s inflation figures, due at 10:00 GMT.

Market expectations are for headline annual CPI to slow to 1.9% in July from 2.0% in June, while core CPI is expected to remain steady at 2.3%.

Euro Outlook

• At Economies.com, we expect that if today’s inflation figures exceed market forecasts, the odds of a September rate cut by the ECB will fall further, potentially boosting euro exchange rates in the forex market.

Weekly Performance

So far this week, the euro is down approximately 2.65% against the US dollar, on track for its third weekly loss this month and the sharpest weekly drop since September 2022.

US–EU Trade Agreement

At their meeting in Scotland on Sunday, US President Donald Trump and European Commission President Ursula von der Leyen announced a new trade deal that includes:

• A 15% US tariff on European imports — including cars, pharmaceuticals, and semiconductors — starting August 1.

• A selected group of US goods will be fully exempt from EU tariffs under a “no quid pro quo” framework, including aircraft parts, semiconductor tools, some generic drugs, chemicals, and strategic agricultural products.

• Steel and aluminum tariffs will remain at 50% for now, with potential future replacement by a quota system.

• The EU committed to investing up to $600 billion in the US economy during Trump’s second term.

• The EU also pledged to purchase $750 billion in US energy products — including LNG and nuclear coal — over the next three years.

• Trump stated that the deal aims to reduce the US trade deficit with the EU, which reached $235.6 billion in 2024.

• Von der Leyen described the agreement as bringing “stability and predictability” to both sides and emphasized the goal of “rebalancing” trade relations.

European Reactions

On Monday, France labeled the trade agreement a “black day” for Europe, accusing the EU of caving to Trump in an unbalanced deal.

German Chancellor Friedrich Merz warned that the tariffs would cause “severe” damage to the German economy.