The dollar began the week on a weaker footing as investors reassess U.S. Trade policy and geopolitical risks surrounding Iran, according to ING. The shift to a 15% import tariff under Section 122, coupled with a potential simultaneous weakening in U.S. Treasuries, stocks, and the dollar, is contributing to market uncertainty. Analysts anticipate that commentary from the Federal Reserve and U.S. Economic data will drive near-term movements, with the U.S. Dollar Index DXY likely to remain confined to a 97.00-98.00 range.
Weak Start Amid Rising Policy Risks
“Regarding trade, the world now has to deal with a 15% import tariff under Section 122, rather than the varying tariff levels imposed under the previous IEEPA system. This means that countries like China and Brazil may receive lower tariff rates, but countries like the United Kingdom and Australia will lose the advantage of their negotiated 10% deals.”
“In our market reaction piece on Friday, we felt that one of the cleanest moves would be weakness in U.S. Treasuries due to financial concerns. Holidays in Asia meant we didn’t see much movement in U.S. Treasuries overnight, but the FX market will certainly take its cues from Treasuries today. There is a small chance of simultaneous selling in Treasuries, stocks, and the dollar if investors believe that one of the core pillars of economic policy in Washington is beginning to crumble.”
“For today, we are interested in remarks from Christopher Waller of the Federal Reserve at 2:00 p.m. Central European Time. He voted for a 25 basis point cut in January. He is expected to remain dovish today with his view that an interest rate cut should be precautionary against further deterioration in the U.S. Labor market.”
“Any less pessimistic comments could give the dollar a boost, given the influential nature of his speeches over the years.”
“The risk of military action against Iran will likely deter significant dollar selling this week, but One can see the U.S. Dollar Index DXY weakening within a 97.00-98.00 range.”
(This article was created with the assistance of an AI tool and reviewed by an editor.)
