The U.S. dollar took a notable hit this week as optimism over a possible peace deal in Ukraine and signs of a slowdown in tariff escalations outweighed lingering inflation concerns, according to a report from Macquarie.

The U.S. Dollar Index Futures slipped 0.3% to 106.79, extending its weekly losses to about 1.4%.

“The dollar’s drop this week comes down to two main factors. First, the momentum behind tariff increases appears to be slowing, even though U.S. import tariffs remain a hot topic in the headlines,” Macquarie analysts said.

President Donald Trump’s tariff threats are increasingly being seen as negotiation tactics rather than immediate policy shifts. This view has been reinforced by delays in steel and aluminum tariffs, grace periods for Mexico and Canada, and a focus on “fair and reciprocal” trade rather than abrupt new duties.

At the same time, Russian President Vladimir Putin’s pledge to work toward a ceasefire in Ukraine, following talks with Trump, has renewed hope for peace. That optimism has weakened demand for the dollar, typically seen as a safe-haven asset during times of geopolitical risk.

“We—and traders—see a strong chance of a peace deal, especially given that this conflict has dragged on for three years without a clear resolution,” Macquarie analysts noted.

Despite the dollar’s slump, inflation data released this week has kept concerns about rising prices in focus. Federal Reserve officials, including Chair Jerome Powell, have signaled a wait-and-see approach on rate cuts, saying they will monitor economic conditions before making any policy moves.