The US dollar has hit a three-year low, and the global FX landscape is shifting fast. As geopolitical tensions ease and central banks recalibrate, July brings a critical inflection point for currency markets, especially with the looming July 9 tariff deadline set by the Trump administration.
Download Convera’s Global FX Outlook for July 2025 to understand how these developments could affect your bottom line.
Greenback weakens despite global uncertainty
June saw the USD initially spike on Middle East tensions, but those gains quickly evaporated. The USD Index is now at its lowest since early 2022, down over 10% year-to-date, marking its second-worst start to a year since 1967. Even with geopolitical risks, the dollar’s safe-haven appeal is fading fast.
Meanwhile, US equity markets remain buoyant, with the S&P 500 and Nasdaq hitting record highs. A weaker dollar and growing expectations of Fed rate cuts have created a favorable backdrop for global risk assets.
Currency highlights
- EUR/USD surged to its highest level since mid-2021 last month, as markets bet the ECB is nearing the end of its rate-cutting cycle.
- GBP/USD showed more sensitivity to geopolitical risks, falling to two-month lows against the euro amid dovish signals from the Bank of England.
- AUD held steady against the USD but weakened against most other majors, weighed down by global trade policy uncertainty.
Key themes to watch
1. Fed easing in limbo
Fed Chair, Jerome Powell remains cautious, but dovish tones from other Fed officials suggest a shift may be coming, especially if inflation stays tame. Will internal divisions and political pressure accelerate rate cuts?
2. Stagflation risks resurface
Global trade disruptions and rising oil prices are reviving stagflation fears. Europe faces sluggish growth (just 0.8% projected for 2025), while the Fed’s hawkish stance may delay easing despite inflationary pressures.
3. Geopolitical support for USD fades
The ceasefire between Iran and Israel has removed a key support for the dollar. With Trump’s fiscal agenda widening the deficit and trade policy still unclear, structural headwinds are back in focus.
4. Tariff trigger: July 9
All eyes are on July 9, dubbed “Liberation Day” by the Trump administration. Countries without finalized trade deals face a sharp tariff hike above the current 10%. Only the UK has secured a deal so far, and even that left key issues unresolved. Legal challenges and supply chain disruptions are already underway, with businesses scrambling to prepare.
Watch a recap of Convera’s Global FX Outlook for July
Get the inside scoop on July’s FX trends. Watch our Market Insights team break down the key themes and what they mean for your business.
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