The dollar hit a three-year low while the FTSE 100 reached a record high, spurred by Donald Trump’s trade threats and concerns over a weakening economy prompting potential interest rate cuts by the Federal Reserve. Foreign exchange traders favored the yen and euro over the dollar, leading to a 10% decline against a basket of currencies since the year began. As London’s FTSE 100 closed at 8,884 points, investors sought alternatives to US company shares amidst uncertainties. Factors such as weakening job market data and White House policy unpredictability fueled the dollar’s decline.

Trump’s revival of country-specific tariff threats and speculation around faster Federal Reserve rate cuts due to lower-than-expected inflation added to market unease. The UK may benefit from a trade boost following a bilateral deal with the US, potentially avoiding extra import duties on cars. However, concerns over the UK economy’s struggles and potential Bank of England rate cuts hindered the pound’s rise against the dollar.

Market analysts attribute the dollar’s consistent depreciation since Trump’s presidency to doubts about sustained US economic growth and increasing government debts. The need for higher interest rates and a weaker exchange rate to attract US lending further complicates the market landscape. Overall, market volatility persists as investors navigate shifting global equity markets and geopolitical tensions affecting trade negotiations between countries like India and the US.