- DXY remains muted as inflation slows faster than expected.
- China and the EU vow retaliation over US tariffs.
- Ukraine-Russia ceasefire deal under discussion.
- US Dollar Index stabilizes in the mid-103.00 area.
The US Dollar steadies on Wednesday, with DXY hovering around 103.50 as traders digest the latest Consumer Price Index (CPI) data. The February inflation report showed both headline and core figures cooling faster than anticipated, reinforcing expectations of softer price pressures ahead of recently imposed United States (US) tariffs. US President Donald Trump was also on the wires, and markets are assessing his words.
Daily digest market movers: Inflation cools, trade tensions rise
- The latest CPI report showed inflation decelerating in February, with both monthly and yearly figures coming in below expectations.
- Monthly headline inflation registered at 0.2%, down from 0.5% in January, while core inflation eased to 0.2%, softer than the expected 0.3%.
- On a yearly basis, headline inflation slipped to 2.8% from 3.0%, while core inflation fell to 3.1% from 3.3%.
- On the global trade front, China reaffirmed plans to retaliate against recent US tariffs, adding to trade concerns.
- EU Commission President Ursula von der Leyen confirmed that the bloc is preparing to impose countermeasures on April 13.
- Diplomatic efforts to end the Ukraine-Russia conflict gained traction, with a potential ceasefire deal brokered by the US now awaiting Russia’s response.
- During a press event with Ireland’s Prime Minister, US President Donald Trump reiterated his grievances over European trade policies, highlighting his intention to impose tariffs on imported cars.
DXY technical outlook: Key support levels in focus
The US Dollar Index (DXY) remains under pressure, holding just above multi-month lows near 103.50. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest oversold conditions, prompting traders to pause aggressive selling. Despite the recent slump, a break below 103.30 could open the door for further losses, while a rebound above 104.00 may trigger short-term recovery attempts.
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.
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