The Dollar Index surged to its strongest close in two-and-a-half weeks above 104.00. Investors were happy as the threat of tariffs was lifted. This latest increase ends two consecutive months of declines and suggests a new turn in overall market mood. Business and consumer confidence is waning. After peaking at the end of 2023, this composite score fell to 51.6 in February, the lowest point since late 2023. Even with these headwinds, Federal Reserve Chair Jerome Powell dismissed the weaker survey data, focusing instead on stronger real-sector readings.
Investors were buoyed by positive signals from a senior US official who indicated a reduction in the threat of reciprocal and sectoral tariffs scheduled for April 2. The attention is still largely on the former, though a few exemptions are now under discussion. This diplomatic maneuvering has given markets a measure of confidence in the face of continuing economic uncertainty.
Sterling took a big fall, trading below $1.29 going into the weekend for the first time since March 11. It briefly dipped below that level, reaching just under $1.2890, before climbing back up close to $1.2960. Concurrently, the US dollar began the week with a three-week decline against the Canadian dollar, marking its longest losing streak since last August. The drop was modest, with the US dollar index dropping by less than 0.85% during this stretch.
In another positive sign, both the manufacturing and services PMI held strong in the wake of even more bad weather from March’s tropical cyclone jewel. This resilience is further testament to the strength found in some sectors—creative economies—while the nation faces an economic headwind. So the Australian dollar came under serious pressure this past week. It hit the skids for four consecutive sessions before settling just under $0.6260 ahead of the weekend, its weakest level since March 5. Despite today’s bounce, it’s still well below last Friday’s high of just over $0.6300.
The Dollar Index’s recent performance is best interpreted as the result of a complicated interaction between domestic and foreign economic conditions, including currency dynamics and geopolitical events. As markets continue to navigate these challenges, attention will remain focused on key metrics and diplomatic efforts to mitigate potential economic disruptions.