- The US Dollar Index is exhibiting a flat trajectory ahead of the US trading session, as initial optimism surrounding a potential US-UK trade agreement wanes.
- CNN reports that existing 10% tariffs on goods from the UK will remain in effect, despite the recently brokered trade deal with the US.
- The US Dollar Index is encountering resistance and stabilizing below the 100.00 level as the US trading session commences this Thursday.
The US Dollar Index (DXY), a benchmark reflecting the US Dollar’s (USD) value against a basket of six major global currencies, is trading without a clear direction, retreating below the 100.00 threshold. This movement precedes an anticipated announcement by former President Donald Trump regarding a “major trade deal” between the United States (US) and the United Kingdom (UK). However, the initial enthusiasm surrounding this potential agreement is rapidly diminishing following reports from CNN indicating that the 10% tariff on UK goods will remain in place. This contradicts earlier assertions from President Trump, who had characterized the trade deal as comprehensive and mutually beneficial. Market participants are now reassessing the potential impact of the agreement in light of these conflicting reports.
The Dollar experienced a surge in value late Wednesday, primarily driven by the Federal Reserve’s latest policy decision and subsequent remarks from Fed Chairman Jerome Powell. As widely expected, the Federal Reserve maintained its benchmark policy rate within the 4.25%-4.50% range. Chairman Powell reiterated a cautious, data-dependent approach to future monetary policy adjustments, citing persistent economic uncertainty and the potential for a resurgence in inflationary pressures. This stance suggests that the Fed is unlikely to implement interest rate cuts in the near term. Consequently, the US Dollar has strengthened, supported by the comparatively wider yield differential between US assets and those of other countries, making the Greenback a more attractive investment option for yield-seeking investors. Furthermore, recent economic data, including stronger-than-expected jobs reports and persistent inflation figures, have reinforced the Fed’s hawkish stance.
