The U.S. dollar remained weak on Wednesday, hovering near its lowest point in five months as traders responded to growing trade conflicts and changing geopolitical situations. In response to new U.S. tariffs on steel and aluminum, the European Union plans to impose its own tariffs on $28.39 billion worth of American goods starting in April. This back-and-forth tariff battle has raised fears about a wider global trade war.
The euro dropped slightly to $1.0902 after reaching $1.0947 on Tuesday—its highest level in five months. This strength came from two factors: Ukraine agreeing to a U.S.-suggested 30-day ceasefire with Russia and Germany’s plans for major government spending. Canada’s dollar steadied after a rollercoaster Tuesday when President Trump first announced he would double tariffs on Canadian steel and aluminum to 50%, then quickly changed his mind. Now Canada plans to announce $29.8 billion in retaliatory tariffs against the U.S.
Investors are increasingly worried about the U.S. economy and are closely watching Wednesday’s inflation report. Barclays strategist Julien Lafargue warned this creates a “lose-lose situation”—high inflation numbers could suggest stagflation, while low numbers might signal a recession. Despite all this uncertainty, the dollar rose slightly by 0.1% against a basket of major currencies and gained 0.6% against the Japanese yen. As one analyst put it, there are “so many moving parts” affecting currency markets right now, with investors more concerned about economic growth than inflation.