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11 Mar 2025

US Dollar extends losses amid fresh trade tensions

  • DXY plunges as US-Canada trade dispute escalates.
  • US equities retreat, Dow Jones down over 1%.
  • DXY dips below 103.50, with markets eyeing further downside.

The US Dollar (DXY) continues its downward spiral on Tuesday, with DXY hovering near 103.40 as trade tensions escalate. United States (US) President Donald Trump’s decision to hike tariffs on Canadian steel and aluminum to 50% rattled markets, adding further pressure on the Greenback. Meanwhile, in Europe, Germany’s Green coalition voiced support for a defense spending bill, providing an additional boost to the Euro (EUR). US equities erased earlier gains, with the Dow Jones down over 1%, reflecting broader market concerns.

Daily digest market movers: Trade dispute and policy shifts

  • The US-Canada trade rift intensified as President Trump moved forward with a sharp increase in tariffs on Canadian steel and aluminum, hitting 50%.
  • Germany’s Green coalition reaffirmed its commitment to a defense spending bill, reinforcing the Euro’s strength against the US Dollar.
  • The NFIB Business Optimism Index for February fell short, coming in at 100.7, down from the previous 102.8 reading.
  • The CME FedWatch Tool indicates a near certainty that rates will remain unchanged in the March 19 meeting, while the probability of a rate cut in May has climbed significantly.

DXY Technical Outlook: Multi-month lows as indicators signal oversold conditions

The US Dollar Index (DXY) sinks further, slipping below the key 103.50 level, marking its lowest level since October 2024. The 20-day and 100-day Simple Moving Averages (SMA) continue their bearish crossover, reinforcing negative momentum. The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) both indicate oversold conditions, suggesting a possible short-term rebound. However, if 103.30 support fails to hold, the next downside target sits near 103.00.

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.

 

Mar 11, 2025

Mexican Peso holds firm despite Trump’s new tariffs on Canada

The Mexican Peso holds firm against the US Dollar and fails to gain traction even though the latter refreshes year-to-date (YTD) lows against a basket of six currencies, revealed the US Dollar Index (DXY).
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Mar 11, 2025

Canadian Dollar loses ground for a third straight day as trade war heats up

The Canadian Dollar roiled on Tuesday, falling roughly six-tenths of one percent against the Greenback at its lowest as markets weigh the latest evolution in US President Donald Trump’s self-styled trade war against Canada.
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