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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Trump trade memorandum won’t impose new tariffs on day one, says WSJ report

Trump trade memorandum won’t impose new tariffs on day one, says WSJ report


U.S. President-elect Donald Trump speaks during a rally the day before he is scheduled to be inaugurated for a second term, in Washington, U.S., January 19, 2025. 

Brian Snyder | Reuters

President-elect Donald Trump is poised to sign a flurry of executive orders as soon as he’s sworn in, but imposing tariffs on U.S. trading partners won’t be one of the actions Monday, according to the Wall Street Journal.

Trump is set to issue a broad trade memorandum Monday that directs federal agencies to study and assess unfair trade practices and currency policies with other nations, especially China, Canada and Mexico. However, the memo stopped short at slapping any new duties on the countries, according to the Journal, which reviewed a summary of the memo and spoke to Trump’s advisers.

Asked about Trump’s trade policy Monday morning ahead of the inauguration, White House officials referred to the Journal story, confirming the reporting.

The president-elect’s plan on trade could be evolving from what he touted on the campaign trail. His camp has been discussing a schedule of graduated tariffs increasing by about 2% to 5% a month on trading partners, Bloomberg News reported last week.

Trump once made universal tariffs a core tenet of his economic campaign pitch, floating a 20% levy on all imports from all countries with a specifically harsh 60% rate for Chinese goods.

Many economists feared that such protectionist trade policy could make production of goods more expensive and raise consumer prices, just as the world recovers from pandemic-era inflation spikes.

— Click here to read the original story from the Wall Street Journal.



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