On Tuesday the US Dollar Index (DXY) saw some knocks. For most of the day, it hovered near the 100.35 mark, approaching its weakest level in more than a week. The index tracks the US dollar’s performance against a basket of six other major currencies. Despite tentative signs of improvement in economic conditions, the dollar remains under pressure as investors weigh various factors influencing its value.
On Tuesday’s session, even the USD was nervous and had a hard time asserting any real momentum clearly showing the overall market attitude. The recent calming of US recession worries have played into the hands of a more cautious USD bear camp. These factors have somewhat restrained the big short on the dollar, even as the dollar faces significant headwinds versus other currencies.
In the Asian session on Tuesday, the DXY has traded sideways in a relatively tight range. It hovered near the one-week low that it hit yesterday. This lack of progress arrives during a period of decidedly mixed economic signals and an unusual and precarious geopolitical environment. The US’s monthly Retail Sales data was released today and missed expectations entirely. This discouraging outcome increases the risk of weak growth in the quarters ahead.
As of this writing, the USD is mixed against other major global currencies. It is down 0.11% vs the Euro and 0.13% vs the British Pound. The Japanese Yen is no exception, with the dollar dropping by 0.23%. The dollar is up slightly against the loony, gaining 0.04% against the Canadian Dollar. It’s been on a tear against the Australian Dollar too, AUDCAD -0.43% and Kiwi too, NZDCAD -0.05%. It is still down by 0.16% against the Swiss Franc.
One particularly positive sign on the economic front is the US and China’s historic $200 billion tariff reduction agreement. This decision is viewed as a major step toward reducing hostile trade tensions that have dragged on for several years. Both countries—China and the United States—have initiated a 90-day cessation. This pause will give them space to work out a bigger arrangement that could touch all corners of the economy.
The relationship between these economic indicators and geopolitical events leads to an intriguing cocktail of news stories that impacts currency trading. In a recent podcast, analysts pointed out four persistent reasons supporting the dollar. There are other forces at work explaining its recent volatility and relative lack of momentum.