Dollar Falls to 2025 Low Amid Weak Data and Tariff Uncertainty

Dollar weakness intensified as the currency hit a fresh yearly low, pressured by soft retail sales data and uncertainty over US tariff policies.

The Bloomberg Dollar Spot Index slid as much as 0.5% on Friday, reaching session lows after weaker-than-expected January retail sales fueled speculation that the Federal Reserve may implement deeper rate cuts in 2025. Meanwhile, the euro extended gains for a fourth consecutive day, buoyed by Trump’s tariff comments, which notably excluded immediate measures against Europe.

Dollar Faces Bearish Pressure as Market Sentiment Shifts

Dollar bulls are seeing their positions weaken as prolonged tariff uncertainty and slowing economic momentum erode confidence in further gains. Earlier this month, the currency reached a two-year high, driven by expectations of resilient US economic performance and safe-haven demand linked to trade tensions.

However, recent data from the Commodity Futures Trading Commission (CFTC) indicates that speculative traders have trimmed their bullish dollar bets for the fourth straight week. Futures positions tied to a stronger US currency now total $26.5 billion, down by more than $4.7 billion from the previous week. The Bloomberg Dollar Spot Index is on track for a 1% weekly decline, its second consecutive drop, weighed down by gains in the euro, British pound, and Australian dollar.

JPMorgan analysts, including Antonin Delair and Meera Chandan, noted that technical signals have turned bearish, attributing the shift to “more tariff fatigue than anything else.”

Will Dollar Bears Gain the Upper Hand?

Despite the current downturn, some analysts warn that a resurgence in US tariff actions could revive its strength. Goldman Sachs strategists, led by Kamakshya Trivedi, maintain that a more aggressive trade policy could bolster the currency. Meanwhile, a Bank of America survey found that while dollar strength remains a crowded trade, nearly half of investors expect the currency to peak in early 2025.

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