Dollar holds firm, euro retreats amid escalating global trade tensions

The dollar steadied on Friday, while the euro moved further away from a five-month high, as markets grappled with escalating global trade tensions and the risk of a sharp economic slowdown.

Adding to market volatility, US President Donald Trump’s threat to impose 200% tariffs on wine and other alcoholic beverage imports from Europe.

The escalation of tensions between the two traditional allies came after the European Union announced plans to impose tariffs on US whiskey and other products next month, in retaliation for Trump’s 25% tariffs on steel and aluminum imports that took effect earlier this week, according to Reuters.

The euro fell to $1.0847, having retreated from a five-month high hit on Tuesday the previous day.

Hopes for an imminent ceasefire between Ukraine and Russia also faded, with Moscow declaring its support for the US proposal but indicating it would need serious reconsideration. The euro’s decline helped lift the dollar from its lowest level since mid-October, at 103.21 on Tuesday, despite growing concerns about the outlook for the US and global economy in general.

“I think the big question, whatever asset class you’re looking at, is… where do we start to see news that will improve risk sentiment? At the moment, it’s not clear,” said Tony Sycamore, market analyst at IG.

Since hitting a six-month high in January, the dollar has fallen more than 5%, giving up significant gains against the euro, pound, and yen.

The yen pared some of its gains on Friday, reaching 148.32 yen per dollar, with the greenback up 0.35%.

The Japanese currency rose to 146.545 yen per dollar earlier this week, supported by safe-haven bids and bets that the Bank of Japan will raise interest rates again later this year.

The dollar index, which measures the US currency against a basket of major currencies, rose 0.1% to 103.95.