In an interview with Breitbart News Network on Friday, US Treasury Secretary Scott Bessent said, “we don’t get a recursive Biden-flation,” per Reuters.
Further comments
We’re very vigilant about inflation, it could happen again.
Before we can bring down inflation, we also want to help affordability.
As we bring down inflation, we want to bring the absolute price level down through deregulation and bringing down interest rates for house payments and car payments.
Market reaction
At the press time, the US Dollar Index (DXY) is trading 0.14% higher on the day to near 104.00.
Finally, the Greenback managed to regain some composure and clocked acceptable gains following multi-month lows. The broader scenario, however, remained clouded by intense tariff uncertainty as well as fears of a US recession.
Here is what you need to know on Thursday, March 13:
The US Dollar Index (DXY) set aside part of the multi-day deep sell-off, retesting the 103.80 zone amid rising yields. Producer Prices will be in the spotlight seconded by the usual Initial Jobless Claims.
EUR/USD met some resistance and receded to the sub-1.0900 region in response to the mild bounce in the US Dollar. Industrial Production in the euro area will be published along with speeches by the ECB’s De Guindos, Nagel and Villeroy.
GBP/USD pushed harder and came just pips away from the key 1.3000 threshold, just to give away some impulse afterwards. The RICS House Price Balance will be the sole release across the Channel.
USD/JPY added to Tuesday’s uptick, climbing to multi-day highs and briefly surpassing the 149.00 barrier. The weekly Foreign Bond Investment figures are due.
Despite tariff concerns and the uptick in the US Dollar, AUD/USD rose further north of the 0.6300 hurdle, hitting two-day peaks at the same time. The final Building Permits and Private House Approvals are expected, followed by the speech by the RBA’s Jones.
Prices of WTI rose to three-day highs near the $68.00 mark per barrel despite the ounce in the US Dollar and persistent trade war concerns.
Gold prices advanced to two-week tops around $2,940 per troy ounce following tariff jitters and the lower-than-expected US CPI print. Silver prices rose past the $33.00 mark per ounce, coming just short of the yearly peak.
The US Dollar trades broadly in the red on Tuesday, devaluing further against most major peers.
The German Green coalition is said to be back on track for a defense spending bill.
The US Dollar Index heads to the lower range of 103.00 and could break below it.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is eking out lows not seen since October 2024. The index trades above 103.50 at the time of writing on Tuesday. The Greenback faces headwinds on early European comments from the German green coalition, who said to be back on track for an agreement on a German defense spending bill. This pushes the US Dollar (USD) lower in favor of the Euro (EUR).
On the economic data front, the US JOLTS Job Openings report for January will catch most of the attention. Traders are already spooked by recession fears, so a further decline in job openings could add to that conviction and see further downside momentum for the DXY. The US NFIB Business Optimism Index for February already released fell to 100.7, missing the 101 estimate and further down from the previous 102.8 reading.
Daily digest market movers: Some dots to connect
In the early European trading session, a headline was published that the German Green coalition leader said to be hopeful on a defense spending deal this week, Bloomberg reported. This news represents a 180-degree shift from the headline that triggered some US Dollar (USD) strength on Monday, where the Green Party was unwilling to support any defense spending deal.
At 14:00, the US JOLTS Job Openings report for January will be published. Expectations are for an uptick to 7.75 million openings against the 7.6 million from December.
Equities are trying to brush off the doom and gloom from Monday. European equities are higher while US futures are in positive territory.
The CME Fedwatch Tool projects a 95.0% chance for no interest rate changes in the upcoming Fed meeting on March 19. However, the chances of a rate cut at the May 7 meeting increase to 47.8% and to 89.9% at June’s meeting.
The US 10-year yield trades around 4.20%, off its near five-month low of 4.10% printed on Tuesday last week.
US Dollar Index Technical Analysis: Not a one-day event
The US Dollar Index (DXY) faces more selling pressure on Tuesday as recession fears are not going away. Traders remain concerned about tariffs’ impact and uncertainty on the US economy. Seeing the performance in US equities year-to-date, there is not much reason to be happy and no reason to support a stronger Dollar in the current narrative.
There is an upside risk at 104.00 for a firm rejection. If bulls can avoid that, look for a large sprint higher towards the 105.00 round level, with the 200-day Simple Moving Average (SMA) at 105.03. Once broken through that zone, a string of pivotal levels, such as 105.53 and 105.89, will present as caps.
On the downside, the 103.00 round level could be considered a bearish target in case US yields roll off again, with even 101.90 not unthinkable if markets further capitulate on their long-term US Dollar holdings.
US Dollar Index: Daily Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
The US Dollar (USD) remains under pressure on Monday, with DXY hovering around 103.95, struggling to find traction after last week’s steep decline. Federal Reserve (Fed) Chair Jerome Powell’s latest remarks on Friday reassured markets that the central bank sees no urgent need to adjust policy at the moment, though economic uncertainties are growing. Meanwhile, the Nasdaq is facing heavy market losses, down 3.3%, as investors remain cautious ahead of key United States (US) inflation data due midweek.
Daily digest market movers: Fed in focus as CPI looms
Market participants are bracing for the release of February’s Consumer Price Index (CPI) on Wednesday, expected to provide key insights into inflation trends.
The Federal Reserve enters its blackout period ahead of the March 19 meeting, limiting central bank commentary for the week.
Fed Chair Jerome Powell reiterated on Friday that the Fed remains patient and does not see an urgent need to act, preferring to wait for additional economic data before making any policy changes.
US equities face a sharp correction, with the Nasdaq leading losses, down 3.3%.
CME FedWatch Tool indicates a majority expectation for rates to remain at current levels in May, while June rate cut expectations have risen significantly.
Ahead of the blackout media period, the Fed’s sentiment index on the daily chart has fallen towards neutral ground, which could also explain the USD’s decline.
DXY technical outlook: Testing support near 103.50
The US Dollar Index (DXY) stabilizes below 104.00, consolidating after last week’s steep drop. The 20-day and 100-day Simple Moving Averages (SMA) confirmed a bearish crossover near 107.00, reinforcing the negative trend. The Relative Strength Index (RSI) remains near oversold territory, signaling potential for a short-term rebound. Meanwhile, the Moving Average Convergence Divergence (MACD) remains bearish, suggesting further downside risk unless buyers step in near support levels. If DXY fails to reclaim 104.50, the next support is seen near 103.30, which could determine whether a deeper decline unfolds.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
FX markets are starting to settle down after a momentous week. While events in Europe were really the dominant factor, we would not have seen such big moves in EUR/USD were it not for US short-dated rates crumbling, ING’s FX analyst Chris Turner notes.
DXY may return at 104.30/50
“Financial markets have priced the Fed terminal rate some 50bp lower in a little over a month. That may be enough for the time being barring some shock fall in US JOLTS job opening data (Tuesday) or big rise in the weekly initial jobless claims data (Thursday). Indeed, Federal Reserve Chair Jay Powell was quite sanguine about recent developments in a speech on Friday.”
“One takeaway was his comment that sentiment readings were not good predictors of consumption growth – suggesting it may be too early to predict the demise of the US consumer. This week also sees February CPI data on Wednesday, where the core rate is expected to remain sticky at 0.3% month-on-month. This all supports Powell’s conclusion on Friday that the Fed does not need to be in a hurry to cut rates and could pour a little cold water on the market’s 27bp pricing for a rate cut in June.”
“Also please remember that the US has now switched to Daylight Savings Time, narrowing the time difference until the clocks go forward in Europe on 30 March. Away from US data this week, the focus will be on Ukraine peace talks in Saudi Arabia and the global trade war. DXY could probably do with some consolidation after a tumultuous week, though more selling interest may return at 104.30/50 as long as the European outlook continues to be positively re-assessed.”
Federal Reserve Governor Michelle Bowman, regarded as one of the bank’s most hawkish policymakers, indicated that she might place greater emphasis on labour market indicators when considering future policy decisions.
Key Quotes
Labor market, economic activity will become a larger factor in US central bank policy discussions going forward.
Shocks, structural changes since Covid-19 pandemic may have masked transmission of Fed policy to the economy.
The US Dollar Index depreciates as market expectations grow for more aggressive Fed rate cuts amid US growth concerns.
President Trump exempted Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
The US Nonfarm Payrolls is projected to show job growth, with employment rising to 160K in February.
The US Dollar Index (DXY), which tracks the US Dollar (USD) against six major currencies, continues its losing streak for the fifth consecutive day, pressured by declining US Treasury yields. Market expectations of more aggressive Federal Reserve (Fed) rate cuts amid concerns over US economic growth are contributing to the weakness. The DXY is trading around 103.90 with 2- and 10-year yields on US Treasury bonds standing at 3.94% and 4.24%, respectively, during the early European hours on Friday.
Traders are closely watching global trade developments, particularly Canada’s decision to delay its second round of retaliatory tariffs on US products until April 2. This move follows US President Donald Trump’s exemption of Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
On the labor market front, US Initial Jobless Claims for the week ending March 1 fell to 221K, down from 242K the previous week, according to the US Department of Labor (DOL). The figure came in below market expectations of 235K. Meanwhile, the upcoming US Non-Farm Payrolls (NFP) report is projected to show a modest rebound, with job additions expected to rise to 160K in February, up from 143K in January.
Atlanta Fed President Raphael Bostic commented on Thursday that the US economy remains in a state of flux, making it difficult to predict future developments. Bostic reiterated the Fed’s commitment to bringing inflation down to 2% while minimizing labor market disruptions. He also stressed the importance of business sentiment in shaping monetary policy decisions.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.31%
-0.10%
-0.12%
0.04%
0.46%
0.35%
-0.25%
EUR
0.31%
0.20%
0.21%
0.35%
0.78%
0.67%
0.06%
GBP
0.10%
-0.20%
0.00%
0.14%
0.57%
0.46%
-0.11%
JPY
0.12%
-0.21%
0.00%
0.17%
0.60%
0.49%
-0.08%
CAD
-0.04%
-0.35%
-0.14%
-0.17%
0.42%
0.32%
-0.25%
AUD
-0.46%
-0.78%
-0.57%
-0.60%
-0.42%
-0.10%
-0.66%
NZD
-0.35%
-0.67%
-0.46%
-0.49%
-0.32%
0.10%
-0.56%
CHF
0.25%
-0.06%
0.11%
0.08%
0.25%
0.66%
0.56%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In February, private sector employment in the US grew by just 77K, coming in short of initial estimates of 140K, according to the latest Automatic Data Processing (ADP) report. In addition, the reading was lower than January’s 186K (revised from 183K).
Following the release, Nela Richardson, ADP’s Chief Economist, said that policy uncertainty and a slowdown in consumer spending might have led to layoffs or reduced hiring during the previous month. She noted that ADP’s data, along with other recent indicators, pointed to a cautious approach among employers as they evaluated the economic outlook.
Market reaction
The Greenback extends its decline and challenges the 105.00 support for the first time since early November when tracked by the US Dollar Index (DXY).
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.88%
-0.27%
0.10%
-0.53%
-0.51%
-0.59%
-0.01%
EUR
0.88%
0.62%
0.99%
0.35%
0.37%
0.29%
0.89%
GBP
0.27%
-0.62%
0.34%
-0.26%
-0.25%
-0.33%
0.26%
JPY
-0.10%
-0.99%
-0.34%
-0.64%
-0.64%
-0.72%
-0.12%
CAD
0.53%
-0.35%
0.26%
0.64%
0.02%
-0.06%
0.53%
AUD
0.51%
-0.37%
0.25%
0.64%
-0.02%
-0.07%
0.52%
NZD
0.59%
-0.29%
0.33%
0.72%
0.06%
0.07%
0.60%
CHF
0.00%
-0.89%
-0.26%
0.12%
-0.53%
-0.52%
-0.60%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US ADP Employment Change data at 08:30 GMT.
The ADP Employment Change, and the US labour market, take centre stage this week.
The US private sector is seen adding 140K new jobs in February.
The US Dollar Index continues to trade in the lower end of the range.
The US labor market is set to take center stage this week as fresh concerns mount that the economy may be losing its momentum — a sentiment echoed by recent slower growth and worrisome fundamental data.
In the spotlight, the ADP Research Institute is poised to release its February Employment Change report on Wednesday, offering a snapshot of private-sector job creation.
Typically coming out two days before the official Nonfarm Payrolls (NFP) report, the ADP survey is often seen as an early indicator of trends expected in the Bureau of Labor Statistics (BLS) jobs report — even if the two don’t always tell the same story.
The economic equation: Job growth and Fed policy in focus
Employment is critical as it forms one of the two legs of the Federal Reserve’s (Fed) dual mandate. The US central bank is tasked with maintaining price stability while pursuing maximum employment. As inflationary pressures remain stubborn, the focus appears to have temporarily shifted to the performance of the US labour market following the Fed’s hawkish stance at its January 28–29 meeting.
In the meantime, investors continue to closely monitor the White House’s trade policies and their consequences, particularly after US tariffs on Canadian and Mexican imports took effect on March 4. Fears that these levies could fan the flames of a resurgence in inflationary pressure have driven both the Fed’s prudent approach and the cautious remarks from many of its policymakers.
So far, and in light of the recent set of weaker-than-expected results that have challenged the notion of US “exceptionalism”, market participants now expect the Fed to reduce interest rates by 50 basis points this year.
Amid the ongoing tariff turmoil, the apparent slowing momentum of the US economy, and persistent consumer price pressures, the ADP report — and especially Friday’s Nonfarm Payrolls report — has gained renewed relevance and could help shape the Fed’s next move.
When will the ADP Report be released, and how could it affect the US Dollar Index?
The ADP Employment Change report for February is set to drop on Wednesday at 13:15 GMT with forecasts pointing to an addition of 140K new jobs following January’s gain of 183K. In anticipation, the US Dollar Index (DXY) remains securely on the defensive, putting the key support at 106.00 to the test amid rising jitters over the US economy.
If the ADP report delivers robust numbers, it could momentarily cool the mounting concerns over the US economic slowdown. However, if the results fall short of expectations, it might reinforce worries that the economy is losing momentum—potentially prompting the Fed to reconsider an earlier restart of its easing cycle.
According to Pablo Piovano, Senior Analyst at FXStreet, “If the recovery gains traction, the DXY could revisit the weekly peak of 107.66 (February 28), a region that appears reinforced by the proximity of the transitory 55-day SMA around 107.90, ahead of the February high of 109.88 set on February 3, and the YTD peak of 110.17 from January 13. Surpassing that level might pave the way toward the next resistance at the 2022 high of 114.77 recorded on September 28.
“On the flip side, if sellers manage to seize control, the index might first find support at the 2025 bottom of 105.89 reached on March 4, prior to the December 2024 bottom of 105.42, and eventually at the critical 200-day SMA in the 105.00 zone. Staying above that key threshold is essential for sustaining bullish momentum,” Piovano concludes.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
United States (US) President Donald Trump will address Congress from the US Capitol at around 02:00 GMT Wednesday, marking his first appearance before lawmakers since retaking the White House. He’s expected to outline his vision for a wide range of domestic and foreign policy initiatives.
In his second term, President Trump has wasted no time getting started. He’s signed a series of executive orders in just a few weeks and he promises even more are on the way. During his inaugural speech, he declared that “the golden age of America” had arrived, identifying immigration, trade and national security as top priorities.
On the international front, the President recently held a turbulent Oval Office meeting with Ukrainian President Volodymyr Zelensky. Following that meeting, he announced a pause on military aid to Ukraine.
Turning to trade, another round of tariffs went into effect on March 4. Tariffs on Chinese imports have doubled to 20%, while imports from Canada and Mexico now face a 25% tariff (with a lower 10% rate for Canadian energy). President Trump also revealed plans to impose tariffs on “external” agricultural products starting April 2, along with automobile tariffs and country-by-country reciprocal tariffs set to begin the same day.
DXY erases Friday’s gains, slipping as European leaders back Ukraine peace deal guarantees.
US Manufacturing PMI beats estimates, while ISM Manufacturing PMI misses expectations.
Bond yields edge lower, reinforcing expectations of Fed rate cuts later in 2025.
Technical indicators suggest further downside as key moving averages converge near 107.00.
The US Dollar Index (DXY), which tracks the performance of the Greenback against a basket of six major currencies, is diving sharply on Monday as optimism surrounding a potential Ukraine peace deal weighs on safe-haven demand. European leaders have signaled their willingness to back security guarantees for Ukraine, boosting risk sentiment across global markets.
Meanwhile, United States (US) economic data provided mixed signals. The ISM Manufacturing PMI missed forecasts, while the S&P Global Manufacturing PMI came in stronger than expected. As a result, DXY slides back from last week’s highs, undoing Friday’s advance. Regarding tariffs, Trump was on the wires on Monday during the American session and reiterated its plan to double Chinese tariffs from 10% to 20%, but had little impact on the USD.
Daily digest market movers: US Dollar plunges as geopolitical optimism lifts sentiment, US data comes mixed
DXY tumbles as investors reduce safe-haven exposure amid Ukraine peace deal optimism. This came after several European leaders cooled down the jitters after Friday’s heated conversations between the American and Ukrainian presidents.
On the data front, S&P Global’s final Manufacturing PMI for February exceeded estimates at 52.7, strengthening from the preliminary reading.
ISM Manufacturing PMI came in at 50.3, slightly below the 50.5 forecast and down from January’s 50.9.
The ISM Prices Paid subindex spiked to 62.4, surpassing estimates and accelerating from January’s 54.9.
New Orders component dropped to 48.6, reflecting a significant decline from 55.1 in January.
As a reaction, Wall Street trades mixed, with major US indices posting marginal gains and losses. US Treasury yields drift lower, extending the downtrend from last week’s highs.
The CME FedWatch Tool indicates an increasing probability of a Fed rate cut in June, though some odds still favor steady rates.
DXY technical outlook: Bearish crossover looms as downside momentum builds
The US Dollar Index (DXY) turns lower, slipping below the 20-day and 100-day Simple Moving Averages (SMA), which are nearing a bearish crossover around the 107.00 level. Momentum indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are reinforcing the negative outlook. Key support levels emerge at 106.00 and 105.50, while 107.00 remains the first resistance level should the index attempt a rebound. However, with fundamental and technical factors aligning to the downside, further weakness is likely in the short term.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
US Dollar Index stabilizes around 106.40, hovering near its lowest levels of 2025.
Traders anticipate rate cuts, with Fed bets now pricing in two reductions for 2025.
US President Trump confirms 25% tariffs on Canada, Mexico, and the EU but delays implementation until April.
Markets await the Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge, on Friday.
The US Dollar Index (DXY), which tracks the performance of the US Dollar against a basket of six major currencies, is attempting a modest recovery on Wednesday but remains near yearly lows at 106.50. Traders continue to weigh increased Federal Reserve (Fed) rate cut expectations and the latest tariff developments from US President Donald Trump.
Daily digest market movers: US Dollar steadies as tariff tensions rise
The US Dollar stabilizes around 106.40 as traders digest escalating tariff risks and growing Fed rate cut expectations.
On the tariff front, President Trump confirms 25% tariffs on Canada, Mexico, and the EU but delays their implementation until April.
On the Fed front, markets now expect two rate cuts in 2025, marking a shift from previous Fed guidance.
Traders await Friday’s Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge.
Personal income and spending reports due this week could further shape market expectations.
US Q4 GDP figures will provide insights into the economy’s momentum heading into 2025.
DXY technical outlook: Bulls struggle to gain control
The US Dollar Index is attempting to recover above 106.50, but momentum remains fragile. The 100-day Simple Moving Average (SMA) at 106.60 is proving a key resistance level, with technical indicators still favoring bearish conditions.
The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) both signal persistent downside pressure. If the DXY fails to reclaim 106.60, further declines toward 106.00 could materialize. Bulls need stronger catalysts to regain control, with the 107.00 level serving as the next key upside barrier.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
The US Dollar kicked off the new trading week slightly on the defensive, managing to rebound from fresh multi-week lows amid tariff concerns, lower yields, and renewed jitters on the health of the US economy.
Here is what you need to know on Tuesday, February 25:
The US Dollar Index (DXY) dropped to new two-month lows, trading at shouting distance from the key support at the 106.00 mark. The Consumer Confidence gauged by the Conference Bord will take centre stage seconded by the FHFA’s House Price Index, The Richmond Fed Manufacturing Index, and the API’s weekly report on US crude oil inventories. In addition, the Fed’s Logan, Barr and Barkin are due to speak.
EUR/USD briefly surpassed the 1.0500 barrier on fresh optimism following the results of the German election on Sunday. The final Q4 GDP Growth Rate in Germany will be at the centre of the debate, along with the ECB’s Negotiated Wage Growth and the speech by the ECB’s Nagel.
GBP/USD resumed its uptrend on Monday, rising to new highs in levels closer to the 1.2700 hurdle. The CBI Distributive Trades will be the only data release across the Channel, seconded by the speech by the BoE’s Pill.
After three daily pullbacks in a row, USD/JPY finally regained the smile and charted decent gains to the proximity of the key 150.00 barrier. Next on tap on the Japanese calendar will be the final prints of the December Coincident Index and Leading Economic Index.
AUD/USD treaded water around 0.6350 following an unsuccessful attempt to hit the 0.6400 level earlier in the day. The RBA’s Jones will speak on Tuesday, while the RBA’s Monthly CPI Indicator, and Construction Done figures, are expected on February 26.
Once again, supply concerns lent some much-needed oxygen to crude oil prices, prompting the barrel of American WTI to clock acceptable gains above the $70.00 mark.
Prices of Gold advanced to a record high closer to $2,960 per ounce troy on the back of intense uncertainty surrounding US tariffs. Silver prices added to Friday’s pullback, reaching multi-day lows near the £2.00 mark per ounce.
The US Dollar steadies after an earlier wild ride as a flood of geopolitical news erupts this Monday.
In Germany, the far-right AfD party is outpaced by the CDU.
The US Dollar Index (DXY) has recovered a near 0.50% loss andd trades marginally higher at the time of writing.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, has completely recovered Asian losses in the US trading session this Monday. The initial move down in the US Dollar came in, due to euphoria for the Euro (EUR) after the first German election results showed a firm lead for the Christian Democratic Union of Germany (CDU), which will take the lead in forming a coalition. As the dust settles, this means that fundamentally, no big changes will take place in Germany regarding leadership and political agenda, which triggers the Euro to pare back gains and the DXY to turn flat to positive.
Meanwhile US headlines have been added where several US departments such as the Pentagon have asked employees not to go ahead with the request from Elon Musk and DOGE (Department of Government Efficiency) to disclose their duties. Elon Musk meanwhile issued warnings on Twitter that those who fail to comply coming into the office or reporting back to DOGE, will be put on leave.
In an ongoing G7 meeting, the group is unable to agree on a joint statement to mark the three year since Russia invaded Ukraine, due to disagreements between the US and its European allies. The US opposed language condemning Moscow and a call for more energy sanctions, and has threatened to pull support for a statement altogether, although discussions are ongoing.
The US economic calendar starts off the week slowly, with all eyes on the US Gross Domestic Product (GDP) release for the fourth quarter of 2024 on Thursday and Personal Consumption Expenditures (PCE) for January on Friday. However, the Chicago Fed National Activity Index for January is due this Monday. Later in the day, United States (US) President Donald Trump is also due to deliver a speech.
Daily digest market movers: Not impressed
The Euro (EUR) has given up all its gains against the US Dollar (USD) as traders are not impressed with the possible lack of major reforms or changes in the German political landscape for the new government formation.
The Chicago Fed National Activity Index for January came in at -0.03, a small loss compared to the previous 0.15 reading.
The US Treasury will auction a 3-month, 6-month Bills, and a 2-year Note auction this Monday.
US President Donald Trump is set to hold a press conference with President of France Macron near 19:00 GMT.
Equities are having a sigh of relief after the German election outcome, though the German Dax is fading its intraday gains at the start of the US trading session. The broader pan-European Stoxx 50 index is even turning negative after the US opening bell.
The CME FedWatch tool shows a 41.2% chance that interest rates will remain unchanged at current levels in June against a bigger 46.2% for a 25 basis points (bps) rate cut.
The US 10-year yield trades around 4.43%, down over 3% from last week’s high at 4.574%.
US Dollar Index Technical Analysis: It is bound to move
The US Dollar Index (DXY) portrays a textbook element here, with the German election outcome as a catalyst. During the Asian session, a sigh of relief and support for the Euro was outpacing the Greenback in the idea that a crisis was averted with the Far-Right not having enough seats to secure the lead in Germany. However, now that the dust settles, markets start to realise that the current coalition probability is dull and the same politics markets saw in the past few decades is due, which is seen as not enough to trigger substantial additional upside in Euro.
On the upside, the 100-day Simple Moving Average (SMA) could limit bulls buying the Greenback near 106.61. From there, the next leg could go up to 107.35, a pivotal support from December 2024 and January 2025. In case US President Trump has some surprise comments on Monday, even 107.96 (55-day SMA) could be tested.
On the downside, the 106.52 (April 16, 2024, high) level has seen a false break for now. However, that does mean quite a few stops might have been triggered in the markets, with a few bulls having been washed out of their long US Dollar positions. Another leg lower might be needed to entice those Dollar bulls to reenter at lower levels, near 105.89 or even 105.33.
US Dollar Index: Daily Chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
At last month’s meeting, Fed officials debated whether it might be wise to slow or even pause the reduction of their balance sheet holdings, given that renewed concerns over the federal debt ceiling have come back into play.
In addition, the Minutes showed the staff’s economic outlook remained largely unchanged from December.
Key highlights
All participants at Fed’s January 28-29 meeting saw it as appropriate to hold target interest rate unchanged.
Some participants cited potential changes in trade and immigration policy as having potential to hinder disinflation process.
Vast majority of participants judged risks to dual mandate objectives were roughly in balance.
A couple of participants said it appeared that risks to achieving inflation mandate were greater than risks to employment mandate.
Various participants said it may be appropriate to consider pausing or slowing balance sheet runoff until resolution of debt ceiling dynamics.
Many participants said after conclusion of balance sheet runoff it would be appropriate to structure asset purchases to move maturity composition closer to outstanding stock of Treasury debt.
Fed survey respondents saw balance sheet runoff process concluding by mid-2025, slightly later than previously expected.
Fed staff’s economic outlook largely unchanged from the one provided at December meeting.
In initial discussions of framework review, policymakers expressed openness to changing elements introduced in 2020 document.
This section below was published as a preview of the FOMC Minutes of the December 17-18 meeting at 18:00 GMT.
The Minutes of the Fed’s January 28-29 policy meeting will be published on Wednesday.
Details surrounding the discussions on the decision to keep policy settings unchanged will be scrutinized by investors.
Markets see virtually no chance of a 25 bps Fed rate cut in March.
The Minutes of the United States (US) Federal Reserve’s (Fed) January 28-29 monetary policy meeting will be published on Wednesday at 19:00 GMT. Policymakers decided to maintain the policy rate at the range of 4.25%-4.5% at the first meeting of 2025. However, the central bank removed earlier language suggesting inflation had “made progress” toward its 2% target, instead stating that the pace of price increases “remains elevated.”
Jerome Powell and co decided to hold policy settings unchanged after January meeting
The Federal Open Market Committee (FOMC) voted unanimously to keep the policy rate unchanged. The statement showed that officials expressed confidence that progress in reducing inflation will likely resume later this year but emphasized the need to pause and await further data to confirm this outlook.
In the post-meeting press conference, Fed Chairman Jerome Powell reiterated that they don’t need to be in a hurry to make any adjustments to the policy.
Commenting on the policy outlook earlier in the week, Philadelphia Fed President Patrick Harker said that the current economy argues for a steady policy for now. Similarly, Atlanta Fed President Raphael Bostic noted that the need for patience suggests that the next rate cut could happen later to give more time for information.
When will FOMC Minutes be released and how could it affect the US Dollar?
The FOMC will release the minutes of the January 28-29 policy meeting at 19:00 GMT on Wednesday. Investors will scrutinize the discussions surrounding the policy outlook.
In case the publication shows that policymakers are willing to wait until the second half of the year before reconsidering rate cuts, the immediate reaction could help the US Dollar (USD) gather strength against its rivals. On the other hand, the market reaction could remain subdued and short-lived if the document repeats that officials will adopt a patient approach to further policy easing without providing any fresh clues on the timing.
According to the CME FedWatch Tool, markets currently see virtually no chance of a 25 basis point rate cut in March. Moreover, they price in a more than 80% probability of another policy hold in May. Hence, the market positioning suggests that the publication would need to offer very clearly hawkish language to provide a steady boost to the USD.
Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:
“The Relative Strength Index (RSI) indicator on the daily chart stays well below 50 and the index remains below the 20-day Simple Moving Average (SMA), highlighting a bearish bias in the short term.”
“On the downside, 106.30-106.00 aligns as a key support area, where the 100-day SMA and the Fibonacci 38.2% retracement of the October 2024 – January 2025 uptrend are located. If this support area fails, 105.00-104.90 (200-day SMA, Fibonacci 50% retracement) could be set as the next bearish target. Looking north, resistances could be spotted at 107.50-107.70 (20-day SMA, Fibonacci 23.6% retracement), 108.00 (50-day SMA) and 109.00 (round level).”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
The US Dollar dives lower in the US Retail Sales aftermath and is set to close out the week at a loss.
Almost a full -1 % slide in headline Retail Sales for January spells domestic issues for President Trump.
The US Dollar Index (DXY) drops substantially below 107.00 and is on its way to 106.50.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is devaluing substantially towards 106.50 at the time of writing, amounting to over 1.5% loss on the week since Monday. United States (US) President Donald Trump might be facing his first domestic challenge next to the egg-crisis, with now even US Retail Sales starting to turn over big time. With a whopping -0.9% decline in January headline sales and a surprise decline in Sales excluding cars and transportation by -0.4%, it becomes clear that the US consumer is clearling keeping his money aside for a rainy day.
The economic calendar will start to shift as of now to next week> Investors will focus on the S&P Global Purchase Managers Index (PMI) preliminary data for February due on Friday 21. Meanwhile the weekend could get interesting in case President Donald Trump releases more headlines or actions on tariffs, Ukraine or other topics.
Here are the most important data releases for this Friday:
January Import/Export came out, with the monthly Export Price Index rising to 1.3%, beating the 0.3% expected, while the Import Price Index fcame in at 0.3%, missing the estimate from 0.4% compared to resived 0.2% in December.
January Retail Sales shrank by 0.9% compared to the expected 0.1% contraction, a wide decline from the revised up 0.7% growth in December. Retail Sales without Cars and Transportation contracted by 0.4%, a big disappointment from the expected 0.3% growth and the revised 0.7% in the previous month.
Equities are taking a turn for the worse and are all sliding in red numbers across the board with both European and US indices in red numbers just before the US opening bell.
The CME FedWatch tool shows a 57.4% chance that interest rates will remain unchanged at current levels in June. This suggests that the Fed would keep rates unchanged for longer to fight against persistent inflation.
The US 10-year yield is trading around 4.47%, a nosedive move over just two days time from this week’s high of 4.657%.
US Dollar Index Technical Analysis: Next leg lower
The US Dollar Index (DXY) is done for this week. A clear weekly loss is unavoidable, and the strong resistance at 107.35 is far away. From here, the DXY is technically handed over to the mercy of the moving averages and the Relative Strength Index (RSI), which is still bearing plenty of room for more downturn. The 200-day Simple Moving Average (SMA), trading around 104.93, might be the one to look out for.
On the upside, that previous support at 107.35 has now turned into a firm resistance. Further up, the 55-day SMA at 107.90 must be regained before reclaiming 108.00.
On the downside, look for 106.52 (April 16, 2024, high), 106.34 (100-day SMA), or even 105.89 (resistance in June 2024) as better support levels. Even though the RSI shows room for more downside, the 200-day SMA at 104.93 could be a possible outcome.
US Dollar Index: Daily Chart
BRICS FAQs
The BRICS is the acronym denoting the grouping of Brazil, Russia, India, China and South Africa. The name was created by Goldman Sachs’ economist Jim O’Neill in 2001, years before the alliance between these countries was formally established, to refer to a group of developing economies that were predicted back then to lead the global economy by 2050. The bloc is seen as a counterweight to the G7, the group of developed economies formed by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The BRICS is a bloc which intends to give voice to the so-called “Global South”. The alliance tends to have similar views on geopolitical and diplomatic issues, but still lacks a clear economic integration as the governing systems and cultural divergence between its members is significant. Still, it holds yearly summits at the highest level, coordinates multilateral policies and has implemented initiatives such as the creation of a joint development bank. Egypt, Ethiopia, Iran and the United Arab Emirates joined the group in January 2024.
The five founding members of the BRICS alliance account for 32% of the global economy measured at purchasing power parity as of April 2023, according to data from the International Monetary Fund. This compares with the 30% of the G7 group.
There has been increasing speculation about the BRICS alliance creating a currency backed by some sort of commodity like Gold. The proposal is meant to reduce the use of the dominant US Dollar in cross-border economic exchanges. In the BRICS’ 2023 summit, the group stressed the importance of encouraging the use of local currencies in international trade and financial transactions between the members of the bloc as well as their trading partners. The group also tasked finance ministers and central bank governors “to consider the issue of local currencies, payment instruments and platforms” for this purpose. Even if the bloc’s de-dollarization strategy looks clear, the creation and implementation of a new currency seems to have a long way to go.
US Dollar (USD) traded subdued overnight in absence of fresh catalyst. DXY was last seen at 108 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
Deceleration in core CPI may weigh on USD
“In the semi-annual testimony to Senate Banking panel overnight, Fed Chair Powell signalled that the Fed was in no rush to cut which had been well priced by markets, hence impact on FX has been rather muted. The impact of Powell’s comment was more felt on gold as a no rush to cut implies high for longer may remain. This also comes timely to keep gold’s rise in check for now.”
“Daily momentum and RSI indicators are not showing a clear bias. Sideways trade likely for now. Support at 107.80/90 levels (50 DMA, 23.6% fibo retracement of Oct low to Jan high), 107 levels. Resistance at 108.40 (21 DMA), 110.00/20 levels (previous high).”
“On data, US CPI is top focus tonight (9:30 pm SGT). A deceleration in core CPI may weigh on USD but tariff uncertainty may still imply that USD dips may be shallow. Later tonight, Powell will testify to the House Financial Services committee (11 pm). He is not expected to deviate too much from his recent remarks. Elsewhere, we are also keeping a look out on details with regards to reciprocal tariffs.”
When asked if reciprocal tariffs are still coming on Wednesday, US President Donald Trump said ‘we’ll see’.
Trump commented on this at an event to welcome home a hostage released by Russian President Vladimir Putin late Tuesday.
Market reaction
Markets remain on tenterhooks on Trump’s tariffs uncertainty, with the US Dollar Index (DXY) finding fresh demand above 108.00 so far this Wednesday.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
