US Dollar Struggles Amid Geopolitical Developments and Fed Policy Uncertainty
The US dollar stays put as investors react to easing geopolitical tensions, tariff concerns and shifting expectations about the Fed’s policies. The Dollar Index (DXY) remains ranging under the 107.00 area with risk skewed to the downside. Market sentiment remains positive due to the Russia-Ukraine peace talks. Meanwhile, Friday’s weak US retail sales data continue to weigh on the greenback.
The meeting between the Chinese president and tech entrepreneurs boosted investor confidence, a positive sign for AI and the private sector. Moreover, the Russia-Ukraine peace talks in Riyadh remain in the limelight as these headlines strongly influence the risk appetite.
On the US side, January’s retail sales data couldn’t meet expectations, reinforcing concerns about economic growth. However, wage growth, consumer spending, and solid labour market data show economic resilience. Fed fund futures reveal a 50 bps cut in 2025, a shift in market expectations.
From a trade tariff perspective, the US President confirmed auto levies to be imposed on 2nd April with a gradual rollout of reciprocal tariffs. However, markets have shrugged off these developments.
The key Fed policymakers are scheduled to speak this week. Their comments will provide insights into the Fed’s interest rate and inflation perspective. The recent commentaries from Fed officials indicate a cautious approach, with some pointing to retaining current rates unless inflation ticks down to 2%.
Traders are now eying global PMI data that could highlight the divergence and dominate the dollar’s trajectory. The FOMC meeting minutes will also remain the major event of the week.
The 4-hour chart shows a mild positive scenario as the price moved above the 9-period SMA. However, a minor gap remains unfilled at around 106.70, which could undo today’s gains. Another unfilled gap lies at 104.00, triggered on US election day.
The upside could face a hurdle at 20-period SMA and a horizontal level at 107.30 ahead of 107.50. On the flip side, the price could find a support at 106.50-60 orderblock ahead of 106.00.
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