The US dollar rose to its highest levels in a week against a basket of currencies on Thursday as investors focused on trade war tensions, while the euro was hurt by concerns about next week's European parliamentary elections. The euro was boosted on Wednesday by reports that US President Donald Trump is expected to delay a decision on imposing tariffs on imported cars and parts by up to six months, avoiding opening yet another front in his global trade battles.
Until a delay is official, however, investors remain nervous about a new trade war and how it may affect the global economy. The dollar has benefited as a safe-haven currency even as the United States and China are locked in a trade dispute. "The major theme is, is there enough room to fight multiple trade wars at once?," said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.
"We had some green shoots of global economic stabilization the last five months and now I think the concern is whether or not renewed trade wars will sap some of that confidence and whether or not that, along with some of the slowdown we're seeing in the US economy, will tip the global economy back into a less stable state," McCormick said. Criticisms of European Union policy by Italian deputy Prime Minister Matteo Salvini has also made investors nervous ahead of elections in the region.
The greenback was also bolstered on Thursday by data that showed US homebuilding increased more than expected in April, while a Philadelphia Fed index of business conditions gained in May.
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