Dollar Dips as Euro and Yen Gain: Key Forex Shifts to Watch This Week

Euro and Yen Advance as Dollar Slips on Fed Rate Cut Expectations
The U.S. dollar is weakening across the board as May’s softer inflation readings fuel expectations of interest rate cuts by the Federal Reserve. Investors are now pricing in a policy pivot, with dovish signals pushing the Dollar Index lower. President Trump’s continued emphasis on a weaker dollar to support domestic manufacturing adds further pressure on the greenback’s value.

In contrast, the euro has strengthened, currently trading around $1.1191, and may climb further toward the 1.1575 mark. Optimism over steady Eurozone recovery and divergence from U.S. monetary policy are lifting the shared currency. Meanwhile, the Japanese yen also gained against the dollar, with the USD/JPY pair slipping to a weekly low. The Bank of Japan’s more hawkish tone and market bets on another rate hike have made the yen an attractive safe haven again.

According to MarketWatch, the Trump administration’s stance is reinforcing downward pressure on the dollar as gold and other dollar-sensitive assets continue to rally.

Mixed Moves Across Asia-Pacific and Emerging Markets
The British pound remains resilient above its 50-day simple moving average after the UK reported a 0.7% GDP expansion for Q1 2025. Traders are watching GBP/USD for signs of breaking above resistance amid market confidence in the Bank of England’s cautious tightening path.

In Asia-Pacific, the Australian dollar hovered around 0.6435 USD. While positive employment data lent support, speculation that the Reserve Bank of Australia could cut rates has limited upside momentum. Meanwhile, China’s yuan remained stable, with analysts projecting a tight USD/CNY range near 7.4000 through the summer.

Emerging market currencies painted a mixed picture. The Indian rupee slipped to 85.54 against the U.S. dollar due to foreign institutional investor outflows and increased import demand. However, local stock market gains and falling crude prices offered some support. According to Times of India, these dynamics could moderate further losses in the coming sessions.

Elsewhere, Taiwan’s dollar posted its strongest one-day gain in nearly 40 years, as speculation grew that authorities are allowing appreciation to improve trade terms with the U.S. The Ghanaian cedi is also strengthening due to solid central bank support and rising FX inflows, while Kenya and Nigeria’s currencies face moderate headwinds due to increased importer demand.

Outlook
The week ahead will likely be shaped by incoming U.S. retail data, central bank minutes from Europe and Australia, and geopolitical signals. Forex traders should remain alert to shifts in rate cut probabilities and regional fiscal policy updates as key catalysts for short-term volatility.