- The US Dollar holds ground above 108.00 as traders await weekend tariff announcements.
- Trump threatens 100% tariffs on BRICS nations if they challenge the US Dollar in global trade.
- US PCE inflation data shows steady price pressure, reinforcing the Fed’s cautious stance.
- The US Dollar Index hovers near 108.50, marking a fresh weekly high.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, remains stable above 108.00 ahead of a highly anticipated weekend for global trade policy. With tariffs on Canada and Mexico set to take effect on Saturday, market volatility is expected at the start of next week. In addition, during Friday’s session, Press Sec. Karoline Leavitt reiterated that February 1st will be the deadline for tariff reports. In addition, the US Goverment hinted tariffs for Canada and Mexico tariff at 25% and China at 10% which made the USD surge.
Meanwhile, President Trump reiterated his stance against BRICS nations attempting to introduce a new currency for international trade, vowing harsh tariffs in response. The release of December’s Personal Consumption Expenditures (PCE) inflation data confirmed stable pricing pressure, reinforcing expectations that the Federal Reserve (Fed) will maintain a cautious approach to policy adjustments.
Daily digest market movers: US Dollar firms as traders monitor trade and inflation data
- The US Dollar remains steady as markets await tariff implementation on Canada and Mexico this weekend.
- President Trump warns of 100% tariffs on BRICS nations if they attempt to create an alternative global currency.
- On the data front, December PCE inflation rose 0.2% MoM, while core PCE increased 0.3%, both in line with expectations.
- The Chicago PMI for January came in at 39.5, slightly missing the expected 40.0 but improving from 36.9 in December.
- US Personal Income for December rose 0.4%, while Personal Spending increased 0.5%, signaling continued consumer resilience.
- Regarding Fed expectations, the CME FedWatch Tool projects an 80% probability that the Fed will maintain its current policy rate in March with no adjustments.
- The Atlanta Fed’s GDPNow model will release its initial Q1 growth estimate today, with US Treasury yields bouncing higher and the 10-year yield trading around 4.50%.
- Despite tariff concerns, US equity futures point to a positive open, signaling that risk appetite remains intact.
DXY technical outlook: Dollar holds gains but faces key resistance
The US Dollar Index remains firm above 108.00, nearing its weekly high at 108.35. Momentum indicators suggest a mixed outlook, with the Relative Strength Index (RSI) around 50 and the Moving Average Convergence Divergence (MACD) red bars present, reflecting cautious sentiment.
If DXY extends its recovery, resistance lies near 108.50, while downside support is seen around 107.80. While bullish momentum remains constrained, any unexpected tariff developments over the weekend could trigger fresh volatility, shaping the near-term trajectory of the US Dollar.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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