US Dollar under pressure as trade tensions grow, Fed uncertainty weigh on sentiment
The US Dollar (USD) kicks off the week on the back foot, slipping against major currencies in Monday trading. Investors are reacting to renewed trade tensions ahead of the August 1 deadline and a generally cautious market sentiment. Despite mostly solid US economic data lately, the Greenback is feeling the heat from ongoing uncertainty surrounding the US President Donald Trump administration’s ramped-up tariff threats and increasing political pressure on the Federal Reserve (Fed) to cut interest rates.
The US Dollar Index (DXY), which measures the Greenback against six major currencies, is slipping further after a mild drop in Monday’s Asian session after notching two consecutive weekly gains. Despite a turbulent week marked by fresh tariff threats and reports that President Trump considered firing Fed Chair Jerome Powell, a claim he later downplayed as “highly unlikely”, the US Dollar Index still managed to hold modest gains.
Mixed signals from Fed officials on a possible July rate cut added to the uncertainty, but strong economic data, including solid Retail Sales and a healthy labor market, lent support to the Greenback. The DXY ended the week up 0.62%, showcasing its resilience in the face of political noise and policy tensions. However, the broader trend suggests underlying weakness in the US dollar.
As of the American trading hours, the index is trading around 98.10. Still, the movement has been limited, with the DXY stuck in a tight range between 98.00 and 99.00 over the past five days as it continues to test a cluster of key technical levels.
Looking ahead, the US economic calendar is relatively light, and the Fed is currently in its blackout period ahead of the July 30 policy meeting, meaning that no official comments on monetary policy from Fed members are expected. While Fed Chair Jerome Powell and Governor Michelle Bowman are scheduled to speak on Tuesday, their remarks are expected to avoid policy topics. With the Fed sidelined, markets will look to Thursday’s preliminary S&P Global Purchasing Managers Index (PMI) data and Friday’s Durable Goods orders for fresh clues on the US economy and the Fed’s next move.
Source : Fxstreet
