The US Dollar exhibited resilience on the back of President Trump's recent tariff announcements, despite a slight retreat from the 110.00 level. The currency remained well-supported above 108.00, with investors closely monitoring the impacts of Trump's tariffs on European Union imports and other global trade partners. The potential imposition of a 10% levy on EU imports has led to a downturn for the euro while raising concerns over inflation due to the 25% tariffs on Canada and 10% on China.
President Trump intensified trade tensions by considering new tariffs, criticizing EU trade policies and their minimal importation of US goods. His actions have already sparked concerns about inflation, with a 25% tariff on Canadian goods and a 10% levy on Chinese imports. These measures have led to increased market scrutiny and a shift in investor focus towards US trade policies.
The US manufacturing sector showed signs of strength, with the ISM Manufacturing PMI for January climbing to 50.9 from 49.3, surpassing market expectations of 49.8. This suggests continued robustness in the US economy and supports the US Dollar's resilience in global markets. Additionally, the Prices Paid Index, a critical measure of inflation, rose to 54.9 from 52.5, indicating ongoing pricing pressure.
In 2024, Mexico, China, and Canada accounted for 42% of total US imports, underscoring their significant roles in US trade dynamics. Notably, Mexico emerged as the top exporter with $466.6 billion in exports, as reported by the US Census Bureau. Despite these figures, President Trump's latest tariff threats could potentially alter these trade relationships.
The US Dollar Index (DXY), after failing to test the 110.00 resistance level, remains supported above 108.00. Key resistance is identified at 108.80, with further barriers at 109.50. On the downside, support is seen around 107.80; a break below this level could signal a shift towards a corrective phase for the currency.
Market participants are also keeping an eye on the Federal Reserve's upcoming decisions. The CME FedWatch Tool indicates an 80% probability that the Fed will maintain current interest rates during its March meeting. This expectation contributes to the stability and resilience observed in the US Dollar.
The global economic landscape remains uncertain amidst these developments, with Trump's trade policies potentially reshaping international trade relations. As investors navigate these complexities, the performance of key economic indicators such as the ISM Manufacturing PMI and Prices Paid Index will be closely watched.