US Dollar Index Recovers Modestly Near 97.40 Amid Ongoing Policy and Economic Uncertainty
- rabeelrana
The US Dollar (USD) recovered a portion of its earlier losses, briefly stabilizing near the 97.40 level during Monday’s European session. At the time of writing, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is trading around 97.60, down approximately 0.2% on the day.
Earlier in the session, the Dollar came under notable selling pressure amid heightened uncertainty surrounding US trade policy. Market sentiment deteriorated after the US Supreme Court ruled against President Donald Trump’s tariff measures, deeming them unlawful under the International Emergency Economic Powers Act (IEEPA). The decision weighed on the Dollar’s appeal, as investors questioned the stability and credibility of US trade policy.
In response to the ruling, President Trump criticized the Court’s decision and announced a 15% increase in global import duties in an effort to offset the impact. The escalation added another layer of uncertainty to the broader trade outlook, raising concerns about potential retaliatory measures from key trading partners and the implications for global supply chains.
Macroeconomic data also contributed to the Dollar’s weakness. The Bureau of Economic Analysis (BEA) reported that US Q4 GDP expanded by 1.4% year-on-year, significantly below market expectations of 3% and down from the previous reading of 4.4%. Additionally, February’s S&P Global Composite PMI declined to 52.3 from 53.0 in January, signaling a moderation in both manufacturing and services activity.
The combination of softer economic indicators and renewed trade tensions has prompted investors to reassess the outlook for US monetary policy. Slower growth momentum may increase speculation that the Federal Reserve could adopt a more cautious stance in the coming months, particularly if inflation pressures continue to ease. Looking ahead, market participants will closely monitor speeches from Federal Reserve officials this week for further clarity on the interest rate trajectory and the broader policy outlook.