Tariffs Driving USD Higher
The US Dollar continues to rally on Friday as the recovery gathers steam. The greenback had been lower earlier in the week, fuelled by a less-hawkish-than-expected FOMC meeting. However, focus is now firmly back on Trump and incoming trade tariffs. The president reaffirmed his message this week that he will apply tariffs against Mexico and Canada as of tomorrow, while an additional (but smaller) tariff on China is still being considered. The absence of trade tariffs over the first week of Trump’s presidency had weighed sharply on USD though the market looks primed to rally again now if Trump does press ahead with the signalled measures.
US Inflation Data Due
Looking ahead today, traders will also be watching the latest US core PCE data, expected to have increased last month. If seen, this should give the Dollar a further boost, putting focus back on to diluted, near-term Fed easing expectations. On the back of the FOMC meeting earlier in the week, near-term rate-cut pricing has fallen with the market now only looking for a cut by June, followed by one further cut in December. If incoming inflation and jobs data remains strong, however, June pricing could start to fall also, creating room for a further rally in USD, particularly if set against a backdrop of tariff action from Trump.
Technical Views
DXY
The sell off in DXY has stalled for now into a test of the 107.24 level where we’ve seen strong demand emerge. With momentum studies turning higher, focus is on a fresh test of the 109.35 level while current support holds. Below there, 105.97 would be next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.