USD strengthens on strong consumer confidence and Trump’s trade comments

US Dollar Strengthens on Robust Consumer Confidence and Trade Optimism

The US Dollar gained significant momentum as May’s Consumer Confidence Index soared to 98.0, far exceeding market expectations of 87 and April’s 86 reading. This sharp rise signals growing optimism among American consumers, largely driven by progress in the US-China trade negotiations and a revival in equity markets. The positive sentiment around the trade deal appears to have eased fears of an economic slowdown, providing strong support for the dollar.

In addition to the encouraging consumer data, President Donald Trump’s recent comments on EU trade talks further bolstered the Greenback. Trump’s softening stance on tariffs and reports of pressure on EU leaders to reach a quick trade agreement contributed to a squeeze on USD short positions, strengthening the currency. Meanwhile, Tokyo officials indicated that the US-Japan trade deal is expected to be finalized later than initially planned, possibly after the upcoming G7 summit in mid-June.

Investors are closely awaiting the release of the Federal Open Market Committee (FOMC) minutes for May, which are expected to offer insights into the Federal Reserve’s outlook on tariff-related inflation and future monetary policy. Despite two rate cuts being priced in for the remainder of the year, the Fed’s tone remains cautious. The FOMC met before the US-China deal was reached, meaning members assessed an average tariff rate of 23%, higher than the current estimated 13%, which could affect policy direction.

Further supporting the dollar’s strength, the Dallas Fed manufacturing index surprised to the upside, adding to the growing optimistic outlook on the US economy. Market speculation is also rising about potential currency provisions in upcoming trade agreements, especially concerning Japan and other Asian countries. Should Japan agree to curb the yen’s weakness against the dollar, it might trigger a negative reaction in USD markets due to concerns about similar clauses appearing in other trade deals.

Overall, the combination of robust US economic data, easing trade tensions, and anticipation of Fed policy guidance is currently underpinning the US Dollar’s rally. Traders remain watchful for any shifts following the FOMC minutes release, which could set the tone for currency markets in the near term.