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US Dollar Index on the back foot after Tuesday’s data sees worrying US Business Confidence numbers

  • US Vice President JD Vance’s comments about Europe in leaked Signal chat could be setback from Trump administration.
  • US President Trump issues “secondary tariffs” and puts Venezuela Oil exports as example.  
  • The US Dollar Index fails to break 104.50 after a brief test. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, has broken below 104.00 after headlines from the United States (US) President Donald Trump and his Vice President JD Vance. The index trades slightly above 104.00 at the time of writing on Tuesday, while markets assess two main stories. The first market driver comes from United States (US) President Donald Trump, who issued “secondary tariffs” of 25% on all goods from countries that still buy Oil from Venezuela. Trump eased off on the size and broadness of reciprocal tariffs that are set to kick in on April 2 and commented about adding more targeted tariffs on cars, aluminum, pharmaceuticals, chips and lumber, Bloomberg reports. 

Meanwhile, markets are looking for comments from the European bloc after a US news editor got invited by mistake to a Signal’s chat group with several Trump administration officials, including  Vice President JD Vance, National Security Advisor Michael Waltz, Defense Secretary Pete Hegseth and Secretary of State Marco Rubio, among others. Comments from JD Vance towards Europe painted a clear picture of what and how he would like to see the EU being targeted with tariffs to pay for the US military actions against Houthi rebels, the Financial Times reports. The issue not only raises questions on the stance of the US towards Europe but also about security problems as a third-party chat application was used to discuss US military operations, weapon inventories and tactical plans. 

Daily digest market movers: US economic data worrying

  • In early European trading, the German Institute for Economic Research (IFO) has released its Sentiment Index. The Current Assessment number came in at 85.7, beating the 85.5 expectation and the previous 85.0 reading. 
  • Around 12:40 GMT, Adriana D. Kugler of the Board of Governors of the Federal Reserve (Fed) spoke on the economic landscape and entrepreneurship at the US Hispanic Chamber of Commerce 2025 Legislative Summit. Fed’s Kugler said the Fed can wait and keep rates steady for longer. 
  • The Housing Price Index for January came in at 0.2% as expected, softer compared to the previous 0.4% reading, which got revised to 0.5%.
  • The Philadelphia Fed Non-Manufacturing Activity Index for March fell to a staggering -32.5, coming from already a contraction number of -13.1 in February.
  • Fed Bank of New York President John Williams has delivered opening remarks at the 2025 New York Fed Regional and Community Banking Conference at the New York Fed, New York.
  • Some US economic data has been released around 14:00 GMT:
    • The US Business Confidence or March sinks to -15.1, missing the -11.5 survey and below the previous -12.3 reading. 
    • US Conference Board Consumer Confidence falls to 92.9, coming from 100.1 and missing the 94.0 estimate. 
    • New Home Sales for February drop to 0.676 million units, missing the 0.68 million estimate. 
    • The Richmond Fed Manufacturing Index for March contracts to -4, missing the +1 estimate and below the previous +6.
  • Equities are mixed this Tuesday, with Chinese indices slumping. The Hang Seng closed over 2% lower. European equities are ticking up over 1.00%, while US futures are positive by less than 0.5%.
  • According to the CME Fedwatch Tool, the probability of interest rates remaining at the current range of 4.25%-4.50% in May’s meeting is 89.2%. For June, the odds for borrowing costs being lower stand at 62.5%.
  • The US 10-year yield trades around 4.32% after bonds sold off on Monday with the surge in equities. 

US Dollar Index Technical Analysis: Softer data day

The US Dollar Index (DXY) faces some selling pressure on Tuesday after a very early test to break above 104.50. The turnaround comes after US President Donald Trump issued more concerns and constraints on tariffs ahead of the deadline on April 2. The leaked messages from US Vice President JD Vance on Europe and other trade partners are an issue of concern for markets. 

With the weekly close above 104.00 last week, a large sprint higher towards the 105.00 round level could still occur, with the 200-day Simple Moving Average (SMA) converging at that point and reinforcing this area as a strong resistance at 104.97. Once broken through that zone, a string of pivotal levels, such as 105.53 and 105.89, could limit the upward momentum. 

On the downside, the 104.00 round level could be considered the first nearby support. If that does not hold, the DXY risks falling back into that March range between 104.00 and 103.00. Once the lower end at 103.00 gives way, watch out for 101.90 on the downside. 

US Dollar Index: Daily Chart

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it hold