The U.S. Dollar Index (USDIDX) is declining today, driven by multiple factors – from uncertainty surrounding the final tariffs the U.S. will impose on key trading partners to weaker macroeconomic data from the American economy. Additionally, while higher CPI and PPI inflation readings initially raised concerns, Friday’s PCE data – the most important inflation gauge for the Federal Reserve – came in line with expectations, tempering market reactions.
Although uncertainty about inflationary pressure in the U.S. persists (partly due to rising inflation expectations), whether these pressures will materialize and lead to higher prices remains more of a risk scenario rather than a current reality. Furthermore, the potential impact of trade wars could weaken rather than strengthen the U.S. economy, while rising inflation may dampen consumer spending.
As a result, we observe that higher inflation data at this stage are not unequivocally positive for the dollar. The market must also consider the risk of a shift in Donald Trump’s “hawkish” rhetoric and a potential announcement of a trade deal with Mexico, Canada, and Europe—leading to tariff reductions or even their removal. A decision on this matter could come by the end of tomorrow. Today, at 16:00, the market will focus on the U.S. ISM Manufacturing PMI data. If the reading disappoints analysts’ expectations, we could see further dollar weakness.
16:00 U.S. ISM Manufacturing PMI (February): 50.8 vs. 50.9 previous
- Prices: Expected 56.3 vs. 54.9 previous
- New Orders: Expected 54.6 vs. 55.1 previous
- Employment: Expected 50.1 vs. 50.3 previous
USDIDX Chart (H1 Interval)
Dollar index futures are down nearly 0.6% today, erasing a significant portion of the gains driven by Donald Trump’s recent tariff announcement. Trump proposed 25% tariffs on Canada, Mexico, and selected European imports, as well as an additional 10% tariff on Chinese goods. We can see that the upward move was halted at the 38.2% Fibonacci retracement level of the latest downward wave from January 2025. The Dollar Index has dropped below the EMA50 and is currently testing the EMA200 (red line).
Source: xStation5
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