The US dollar index fell slightly to around 99.50 in early trading in the European market on Thursday. The "Beige Book" released by the Federal Reserve shows that businesses are facing upstream suppliers raising prices due to the possible imposition of tariffs by the Trump administration. Some companies are trying to pass on cost pressures to end consumers, but there is uncertainty about whether they can effectively pass them on.

The current policy outlook is vague and gradually eroding market confidence in the US dollar.

US Treasury Secretary Scott Besant stated that the current tariff policies towards Asian countries are unsustainable and that there are expected to be signs of "cooling down" in the coming weeks.

But the White House later stated that it still plans to set tariffs on Asian countries within two to three weeks, and whether to lower tariffs will depend on the other party's response.

US economic data under pressure, business activity significantly slows down

Economic data shows that the US Composite Purchasing Managers' Index (PMI) fell to 51.2 in April, the lowest since December 2023, from the previous value of 53.3. This decline reflects the overall weakening of the manufacturing and service industries.

Among them, the manufacturing PMI rose from 50.2 to 50.7, better than market expectations, but the service PMI plummeted from 54.4 to 51.4, far below market expectations of 52.8, indicating that the US economy is facing broader growth pressures.

The Federal Reserve has a hawkish attitude, but the outlook remains challenged

Although some Fed officials have been leaning towards hawkish rhetoric in recent times, attempting to stabilize market expectations, Fed Chairman Powell stated last week that the central bank is not urgent about raising interest rates, but pointed out that Trump's trade policies may cause inflation and employment to deviate from targets. This has increased the market's divergent expectations for future policy paths.

Editor's viewpoint:

The biggest challenge currently facing the US dollar comes from the simultaneous weakening of policy uncertainty and economic fundamentals. Although the hawkish rhetoric of the Federal Reserve may provide some support in the short term, if trade tensions escalate again and the service industry continues to slow down, the US dollar may find it difficult to maintain its current level.

The tariff policy dynamics and key economic data in the next two to three weeks will become the focus of market observation, and the US dollar may continue to be under pressure below the 100 point level.