The U.S. dollar edged lower on Monday, nearing a five-month low as concerns grow that uncertainty surrounding the Trump administration’s tariff policies could slow economic growth.

At 08:05 ET (12:05 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, was down 0.2% at 103.162, approaching last week’s five-month low.

Dollar Under Pressure Amid Economic Concerns

The dollar has fallen nearly 5% this year amid worries over the impact of sweeping tariffs imposed by President Trump. Data released on Friday showed that consumer sentiment dropped to its lowest level in nearly two and a half years in March.

U.S. Treasury Secretary Scott Bessent told NBC on Sunday that there were «no guarantees» the U.S. economy would avoid a recession this year, just a week after President Trump declined to rule one out.

Investors will be watching U.S. retail sales data, set for release later on Monday, for further insight into the state of the economy ahead of the Federal Reserve’s interest rate decision on Wednesday.

“No major changes are expected in terms of policy rates, forecasts, or communication,” analysts at ING noted. However, they suggested the event could provide slight upside for the dollar as the Fed maintains its projection for two 25-basis-point rate cuts this year, while markets have priced in 61 basis points of easing.

Euro Gains on German Fiscal Plan

The euro edged higher, with EUR/USD up 0.2% at 1.0907, near last week’s peak and its highest level since October 11. The currency received support ahead of an expected vote in the German parliament on a major infrastructure spending package and changes to borrowing rules.

On Friday, German parties reached an agreement on a fiscal deal aimed at boosting defense spending and supporting economic growth in Europe’s largest economy.

“EUR/USD could rise toward the 1.0930–1.0950 range,” ING analysts noted, though they warned that the pair may face pressure in April as the U.S. moves forward with reciprocal trade tariffs. ING forecasts EUR/USD to trade between 1.05 and 1.10 in the second quarter.

Meanwhile, GBP/USD rose 0.3% to 1.2970, supported by broad dollar weakness ahead of the Bank of England’s policy meeting on Thursday. The central bank is expected to keep interest rates unchanged after inflation ticked higher last month.

Markets currently anticipate 53 basis points of rate cuts from the BoE this year, though ING’s outlook is for 75 basis points. Analysts also pointed to next week’s Spring Statement from UK Chancellor Rachel Reeves as a potential catalyst for a more dovish shift in expectations.

Yen Stable Ahead of BOJ Meeting

In Asia, USD/JPY dipped 0.1% to 148.47 as traders awaited the Bank of Japan’s policy decision later this week. The central bank is expected to keep its benchmark rate at 0.5% despite rising inflation, with policymakers concerned about trade tensions linked to the Trump administration’s tariffs.

The Chinese yuan also gained slightly, with USD/CNY down 0.1% at 7.2312 after China announced a «special action plan» on Sunday aimed at boosting domestic consumption and supporting economic growth.