US Dollar Index (DXY)

The US Dollar Index (DXY) witnessed a significant rise, exceeding the level of 100 points, following legal and political developments that affected market sentiment.

This rise comes after the decision of a US trade court to cancel the tariffs imposed by former President Donald Trump, as the court ruled that he exceeded his powers by imposing those duties.

The court ordered the duties to be canceled permanently, which raised optimism in the markets that a trade breakthrough will occur, despite expectations that the US administration will appeal the decision.

Factors driving the rise of the dollar

Judicial decision on customs duties:

The US Court of International Trade declared the illegality of customs duties on all imports, and not only for the companies that filed the lawsuit.

The court gave Trump a 10-day stay of execution, which boosted investor confidence in the recovery of international trade.

Senate debates on fiscal policy:

Investors are focused on the tax and spending bill that is on the table in Congress, which may see significant amendments, especially in the Senate.

Any changes in fiscal policy may affect the value of the dollar and the US economy.

The Fed's cautious policy:

The minutes of the meeting of the Federal Open Market Committee (FOMC) revealed that officials adopted a wait-and-see approach to monitoring inflation and unemployment developments, as well as assessing the impact of recent government measures.

This policy may support the dollar in the medium term.

Challenges to continued ascent

Despite the recent rally, the dollar is still close to its 2023 lows, recording a decline of more than 7% since the beginning of the year.

Inflation and unemployment risks may also limit its gains, especially as political and legal uncertainty continues.

The dollar will depend on the developments of financial legislation and the position of the Federal Reserve in its next moves.

Nevertheless, the dollar remains under the pressure of economic challenges, which requires careful monitoring in the coming period.