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10 Feb 2025

US Dollar weakens amid mixed economic data and fresh tariff concerns

  • The US Dollar Index trades lower near 108.30 as market sentiment remains cautious.
  • Trump confirms 25% tariffs on steel and aluminum imports but provides no clear implementation timeline.
  • Investors await Powell’s testimony for further clues on the Federal Reserve’s policy outlook.
  • US CPI data from January is also due this week.

The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, is trading softer near 108.30 as investors react to mixed economic data and fresh tariff concerns. Market participants are also turning their focus to Federal Reserve (Fed) Chair Jerome Powell’s upcoming testimony before Congress for guidance on future interest rate policy.

Daily digest market movers: US Dollar weakens as investors assess tariff risks and Powell's testimony

  • Trump announces a 25% tariff on steel and aluminum imports, raising concerns over inflation and global trade tensions.
  • Gold soars to record highs as safe-haven demand increases amid economic uncertainty and potential trade wars.
  • CME FedWatch Tool shows 90% probability of unchanged interest rates at the Fed’s March 19 meeting.
  • US 10-year yield rises to 4.50%, recovering from last week's yearly low.
  • Markets anticipate Powell’s testimony on Tuesday, expecting insights into future monetary policy and interest rate adjustments.
  • Wednesday’s Consumer Price Index (CPI) data from January will also be closely followed by markets.

DXY technical outlook: Bearish bias grows as sellers maintain pressure

The US Dollar Index remains under pressure, struggling to hold above 108.00 as sellers continue to dominate. The Relative Strength Index (RSI) remains below 50, indicating growing bearish momentum, while the DXY holds above the 20-day Simple Moving Average (SMA) at 108.50.

Meanwhile, the Moving Average Convergence Divergence (MACD) indicator continues to show increasing bearish momentum. Sustained selling pressure could lead to a retest of the 107.00 psychological level, with potential downside risks if bearish momentum accelerates.

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.

 

Feb 10, 2025

Mexican Peso falls as Trump announces new tariffs

The Mexican Peso depreciated against the US Dollar on Monday after US President Donald Trump decided to apply 25% tariffs on aluminum and steel imports into the United States (US), including Mexico and Canada.
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Feb 10, 2025

Gold prices soar to record high past $2,900 amid new US tariffs on metals

Gold price rallied sharply and set a record high above $2,900 on Monday after the President of the United States (US), Donald Trump, enacted tariffs of 25% on base metals.
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