US Dollar Index retreats 1% with Trump postponing tariffs on his first day in office

US Dollar Index retreats 1% with Trump postponing tariffs on his first day in office


  • The US Dollar slides 1% in the US Dollar Index, measured against six major currencies. 
  • The WSJ issues a piece that first a task force needs to be formed on tariffs. 
  • The US Dollar Index (DXY) snaps 109.00 and heads towards 108.00

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is sinking 1% just hours ahead of President-elect Donald Trump’s inauguration as the 47th President of the United States (US). Several asset classes in the US will remain closed, such as the Wall Street trading floor and US bond trading, in observance of Martin Luther King’s Day. The first seismic shock in the DXY comes after headlines emerged form the Wall Street Journal that tariffs are not a part of the executive orders that President Donald Trump will issue on his first day in office, and need to be discussed further before being implemented. 

All eyes will be on the aftermath of the inauguration, where President-elect Donald Trump has already confirmed in a rally on Sunday that a whole battery of new measures and executive orders will be issued. The main ones are, of course, more tariffs, mass deportation starting in Chicago, and issuing state of emergencies for energy and border security, Bloomberg reported. By issuing those last two, the upcoming President Trump can give the green light for massive drilling and mass deporting illegal immigrants without having to pass through Congress and the House of Representatives. 

Daily digest market movers: Watch out for the boomerang

  • The Wall Street Journal issues a headline that confirms the Trump administration to form a task group first to discuss proper impacts from tariffs on China, Canada and Mexico before considering to issue them. 
  • At 17:00 GMT, the Presidential Inauguration will take place, with Donald Trump being sworn in as the 47th President of the United States.
  • Due to Martin Luther King’s Day, several trading floors in the US will remain closed throughout the day. 
  • Equities are very happy with the softer US Dollar. All European equities and US futures are off to a good start for this week. 
  • The CME FedWatch tool projects a 55.6% chance that interest rates will remain unchanged at current levels in the May meeting, suggesting a rate cut in June. Expectations are that the Federal Reserve (Fed) will remain data-dependent with uncertainties that could influence inflation during President-elect Donald Trump’s term. 
  • The US 10-year yield is trading around 4.627% and will remain at that level this Monday, as bond trading in the US is closed due to the Martin Luther King’s bank holiday. 

US Dollar Index Technical Analysis: Look at the bigger picture

The US Dollar Index (DXY) sees a split division between bears and bulls. The new Trump administration is set to unleash a large number of executive orders, making it hard for markets to assess the impact. With several topics being addressed and communicated in advance, it looks like markets have already priced in a fair bit of inflationary pressure from Trumponomics. The question now will be if the markets are correct and if the DXY index will ease further from current levels on the back of an overestimation of the actual impact of the measures being imposed. 

On the upside, the 110.00 psychological level remains the key resistance to beat. Further up, the next big upside level to hit before advancing any further remains at 110.79 (September 7, 2022, high). Once beyond there, it is quite a stretch to 113.91, a double top from October 2022.

On the downside, the DXY is trading alongside the ascending trend line coming from December 2023, which currently comes in around 109.10 as nearby support. In case of more downside, the next support is 107.35 (October 3, 2023, high). Further down, the  55-day Simple Moving Average (SMA) at 107.29 should catch any falling knives. 

US Dollar Index: Daily Chart

US Dollar Index: Daily Chart

 



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Dollar dips, stocks creep higher as second Trump term dawns

Dollar dips, stocks creep higher as second Trump term dawns


By Nell Mackenzie and Tom Westbrook

LONDON/SINGAPORE (Reuters) -The dollar drifted lower and stocks were cautiously positive on Monday as investors awaited an expected flurry of policy announcements during the first hours of Donald Trump’s second presidency and eyed a rate hike in Japan at the end of the week.

Trump takes the oath of office at noon Eastern Time (1700 GMT), and promised a “brand new day of American strength” at a rally on Sunday.

He has stoked expectations of a slew of executive orders right away and, in a reminder of his unpredictability, launched a digital token on Friday, which soared above $70 before sliding to around $50 as traders turned uneasy.

Monday is a U.S. holiday, so the first responses to his inauguration in financial markets may be felt in foreign exchange and then during Asian trade on Tuesday.

European stocks edged higher at the open, supported by banks and technology stocks. The pan-European STOXX 600 crept up 0.1%, with the French CAC 40 up 0.2%, the UK FTSE higher by 0.3% and the German DAX flat.

“The fall back in Treasury yields revived equity markets, with European indices doing particularly well,” said a note from the Edmond de Rothschild Group.

Shorter-dated euro zone bond yields steadied by 0923 GMT.

“Trump dominates everything in terms of where we go,” Societe Generale chief FX strategist Kit Juckes said in his morning note, referencing markets in general and noting that trader positions betting on a rise in the dollar compared with other currencies had reached their highest since 2022.

The dollar is up more than 8% on the euro since September and at $1.0309 is not far from last week’s two-year high. But so much is priced in that some analysts feel a more gradual start to U.S. tariff hikes may draw out some sellers.

Trump has threatened tariffs of as much as 10% on global imports and 60% on Chinese goods, plus a 25% import surcharge on Canadian and Mexican products, duties that trade experts say would upend trade flows, raise costs and draw retaliation.

The Canadian dollar touched a five-year low of C$1.4474 per dollar on Monday. The Mexican peso hit a 2-1/2 year low of 20.94 per dollar on Friday. [FRX/]

Bitcoin shot up 4%, hitting a record high of $108,943, while Trump’s newly-created cryptocurrency launched on Friday – known as $TRUMP – soared to nearly $12 billion in market value, drawing in billions in trading volume. Melania Trump’s crytocurrency launched on Sunday hit a market cap of $1.9 billion.

CHINA FOCUS

China is in focus as the target of the harshest potential trade levies. Investors have cheered better-than-expected Chinese growth data and a Friday phone call between Trump and Chinese President Xi Jinping that left both upbeat.



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