US FX WRAP: Dollar helped by Trump tariff threats and dissatisfaction of latest Iran proposal

The dollar erased early-session losses from lower crude prices, as US President Trump threatened the EU with 25% tariffs on their trucks and cars (prev. 15%), claiming they're not complying with the previously agreed trade deal. Helping the rebound into the green, Trump also expressed that he is not satisfied with the latest proposal from Iran. Despite crude prices getting lower, the dollar was generally firmer, perhaps amid the 2yr yield reversing initial downside. Possibly behind the move was the collection of all the Fed dissents on the easing bias language within the statement. Logan, Hammack, and Kashkari, all 2026 voters, cited increased uncertainty, upside risks to inflation, and inappropriate language given the changed outlook. Separately, US ISM Manufacturing PMI missed on the headline, and of concern, prices paid rose to its highest level in four years, while employment hit a YTD low. DXY hit lows of 97.72 before reversing to ~98.18

A slight rebound in the USD/JPY helped the overall dollar index, rising to ~157.04 at the time of writing. New WTD lows of 155.49 were seen as speculation on FX intervention continued. BoJ data for April 30th showed FX intervention of some JPY 5.4tln. ING writes that unless Washington gets involved, "we think there will be good demand for USD/JPY near 155, given high energy prices, hesitant BoJ tightening, and a Fed being blown off its easy course".