The US Dollar (USD) is ending the week on a firm note, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD gains as US equity futures, Treasurys weaken on tariff news

"More tariff threats—35% on Canada from August 1, baseline 15-20% tariffs elsewhere and a suggestion from President Trump that the EU could get its tariff letter shortly—boosted the USD and weighed on the major currencies. The CHF is resisting the USD advance though while the JPY is underperforming, along with high beta FX. The USD gains reflect increased risk aversion amid weaker equities—European stocks are down sharply and US futures are lower by 0.5/0.6%—and lower bonds."

"US Treasurys are underperforming and Sep FOMC pricing has seen rate cut expectations pared back marginally Dollar gains may be getting some yield support but largely look to be a kneejerk response to trade headlines more than anything. It is notable that while the uptrend in the DXY that got underway at the start of the month remains intact, the jump in the dollar in response to these latest tariff developments did not extend the rise in the index."

"Most currencies have found support around (or close to) their lows seen earlier in the week. Investors may consider these threats to be largely negotiating tactics at this point. The DXY rebound has some decent technical traction, which a firm close on the week will solidify. But, after nine consecutive daily gains in the DXY, the rebound through the upper 97s is starting to look a little stretched, at least in the short run, and is challenging some longer-run technical resistance. We may see a period of choppier price action develop in the dollar from here."