- The Dollar Index gains traction, hitting a fresh weekly high above 108.00 as market sentiment deteriorates.
- US Durable Goods Orders disappointed, declining by 2.2% in December, missing expectations for a 0.8% increase.
- Treasury Secretary Scott Bessent proposed gradual tariffs, but Trump pushed for higher, uniform rates, spooking investors.
- Consumer Confidence in January fell to 104.1 from December’s 109.5, reflecting growing concerns over the economic outlook.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, extended its gains on Tuesday, consolidating above the psychological 108.00 level. Market sentiment soured after renewed concerns over tariffs and weak US economic data, including lower-than-expected Durable Goods Orders and declining Consumer Confidence. Despite these headwinds, the DXY managed to hold above its recent lows, signaling some resilience.
Daily digest market movers: US Dollar gains despite weak economic data
- Treasury Secretary Scott Bessent proposed incremental tariffs on all US imports, starting at 2.5%, triggering risk aversion in markets.
- President Trump countered Bessent’s suggestion, demanding significantly higher tariffs, further unsettling global financial markets.
- The Conference Board’s Consumer Confidence Index fell to 104.1 in January from 109.5 in December, indicating weaker sentiment.
- Durable Goods Orders decreased by 2.2% in December, led by a 7.4% drop in transportation equipment, marking another economic setback.
- Excluding transportation, new orders rose modestly by 0.3%, offering limited optimism amidst broader declines.
- Concerns over overvalued AI shares contributed to a cautious market mood, limiting risk appetite and favoring the US Dollar.
- Investors now flick their eyes to Wednesday’s Federal Reserve decision, where a hold is already priced in.
DXY technical outlook: Resilience above 108.00, correction risks linger
The Dollar Index showed resilience by reclaiming levels above 108.00, bolstered by renewed safe-haven demand. Technical indicators, however, paint a mixed picture. While the RSI remains below 50, hinting at weak momentum, the MACD shows growing flat bars, signaling sustained bearish pressure.
On the bright side, an upward correction could extend if the downward movement becomes overstretched. Immediate resistance lies at 108.50, while a failure to maintain 108.00 could see the DXY index revisiting support near 107.50.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
