The U.S. dollar slumped to its lowest level since late 2023 on Monday, primarily driven by China’s warning that it would retaliate against nations cooperating with the U.S. in trade deals that compromise Beijing’s interests. President Trump’s renewed criticism of Fed Chair Jerome Powell further pressured the greenback, capping recovery attempts in early U.S. trading.
Key factors driving today’s market:
- China threatened countermeasures against countries aligning with U.S. trade policies
- U.S. Dollar Index futures fell as much as 1.45% from session open
- Trump’s criticism of Powell added to dollar weakness after a brief early-session bounce
- Treasury yield curve steepened with short-end yields declining as stocks fell
- The euro reached a three-year high while the yen hit levels not seen since September
China’s Ministry of Commerce issued a stark warning Monday: “China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures.”
The statement comes as the Trump administration reportedly plans to use tariff negotiations to pressure U.S. partners to limit their dealings with China, following Trump’s increase of duties on Chinese goods to 145% earlier this month.
Trump’s Comments Cap Dollar Recovery
While China’s trade warnings were the primary catalyst for dollar weakness, President Trump’s latest criticism of Fed Chair Powell capped any recovery in the greenback during early U.S. trading.
Trump wrote on Truth Social Monday morning: “‘Preemptive Cuts’ in Interest Rates are being called for by many,” adding that with lower energy costs and food prices “there is virtually No Inflation,” and warning of economic slowdown “unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
This follows White House confirmation last week that the administration is studying whether Powell can be legally removed, with National Economic Council Director Kevin Hassett confirming the president is “continuing to study that matter.”
Market Reactions
Monday’s trading session proved challenging for the U.S. dollar, as clearly illustrated by the 5-minute chart of the Dollar Index futures. The day began with a slide during Asian hours, a move strongly linked to headlines out of China warning other countries about forging trade deals that could disadvantage Beijing in relation to Washington. This news sent the index tumbling from its opening level near 99.170, eventually finding a bottom around 97.75 during the morning London session.
The typically lighter trading volumes associated with the Easter Monday holiday across many parts of the globe likely amplified this downward momentum. Although U.S. traders returned from their holiday break, any potential stabilization was short-lived.
Later in the session, President Trump’s social media broadside against Fed Chair Powell cast a pall over U.S. assets, particularly hitting equity futures. The E-mini S&P 500 futures reacted sharply, plummeting -2.41% to settle at 5,130 in the wake of Trump’s comments.
