The US Dollar experienced a sharp decline on Thursday, as traders reacted to President Trump’s sweeping tariff announcement. Labeling it “Liberation Day,” Trump unveiled a 10% baseline tariff on nearly all US imports, with significantly higher rates targeting nations such as China, Japan, and the EU.

The concerns about an impact on economic growth in the US and elsewhere could fuel risk aversion. The dollar could come under more pressure if trade tensions continue to rise.

Markets responded swiftly as global equities dropped, bond yields plunged, and recession fears resurfaced. The US 10-year Treasury yield fell to 4.0%, its lowest since October 2024, as investors sought safety. The declining yields could affect the dollar, adding to the risks.

Looking ahead, investors will focus on ISM Services PMI and Non-Farm Payrolls for clues on growth momentum. Powell’s speech on Friday could also prove pivotal in shaping the dollar’s short-term outlook. A dovish tone may deepen dollar losses, while caution could stabilize the currency.