USD is under tariff pressure – BBH

US Dollar (USD) remains under downside pressure largely against the cyclical-sensitive currencies while global equity markets are powering forward, BBH FX analysts report.

Risk rally weighs on USD

"Diminishing trade policy uncertainty is supporting risk assets. Yesterday, the US struck a trade pact with Japan and the Philippines. Moreover, US Treasury Secretary Scott Bessent will meet his Chinese counterparts in Stockholm next week for their third round of talks aimed at extending a tariff truce which is set to expire on August 12."

"Nevertheless, several countries (notably the Eurozone) face steeper tariff rates starting August 1 – a date Bessent described as a 'pretty hard deadline' for concluding negotiations with the US. The implication is the US average effective tariff rate is set to climb even further."

"As of July 14, the rate is estimated at 20.6%, the highest since 1910, up from about 8% in May and 2.4% in January. Higher US levies pose a downside risk to US growth and upside risk to inflation, and an ongoing drag for USD."