US Dollar Index (DXY)
The US Dollar Index (DXY) fell at the beginning of the week, heading towards the 100-day lows on Monday, in a decline that reduces the gains made last week. This decline comes as investors are looking for more clarity on the future of trade relations between the United States and China, while attention is also turning towards the Federal Reserve meeting scheduled for this week.
Trade fears weigh on the dollar
US President Donald Trump on Sunday expressed his belief that China has a desire to reach a trade agreement, but did not provide specific details or a timetable for achieving this.
Beijing, for its part, indicated its readiness to resume negotiations, but stressed that the United States should begin to cancel the unilaterally imposed tariffs as a step to show goodwill.
These mutual statements leave the markets in suspense, as trade tensions between the world's two largest economies continue to be a major pressure factor on currency movements and financial markets.
Attention turns to the Fed meeting
On the other hand, investors are looking forward to the Federal Reserve meeting scheduled for Wednesday, where the US central bank is expected to keep interest rates unchanged amid continuing uncertainty surrounding the global economy and international trade.
The strong jobs report for April, which exceeded expectations, also contributed to reducing the likelihood of an interest rate cut during the next June meeting, which reinforced expectations that the Fed may adopt a more hawkish stance in its monetary policies, and markets currently estimate that the probability of an interest rate cut in June does not exceed 37%, after it exceeded 60% last April.
In the end, the US dollar seems to be facing multiple pressures, between unresolved trade concerns and expectations of a more cautious monetary policy from the Fed. With an unclear vision of the course of negotiations between Washington and Beijing, volatility in the currency markets may continue until there are clearer signs of a settlement of the trade crisis or clear directions from the US central bank.
