The has been rising for the past two weeks but is now moving more cautiously. After reaching as high as 98.95 last week, it started this week steady around 98.4. This reflects market uncertainty caused by the upcoming August 1 tariffs, the , and President Donald Trump’s statements.
Countdown to Tariffs Begins
US Secretary of Commerce Howard Lutnick confirmed that August 1 remains a firm deadline for tariffs, with negotiations expected to continue until then. However, this has not eased market uncertainty. There is growing concern that the White House may use tariffs not only for trade purposes but also as a tool for political pressure, which continues to influence the direction of the US dollar.
As highlighted in last week’s analysis, Trump’s aggressive trade policies create short-term uncertainty but still reinforce the dollar’s role as a global reserve currency. A similar situation is unfolding now. Amid ongoing geopolitical tensions, the US Dollar Index (DXY) remains strong, while investors are closely watching how the EU responds to the tariff threat.
Meanwhile, recent Fed statements have lowered hopes for an immediate rate cut. However, has openly supported a July cut, arguing that the impact of tariffs would be temporary and pointing to weak inflation and signs of labor market slowdown as reasons for easing.
However, these comments have not gained wide support within the Fed. As policymakers enter a quiet period ahead of the July rate decision, markets are now almost certain that there will be no rate cut this month.
Expectations for a September rate cut have also declined, with the probability falling to 63% — the lowest so far this year. Still, Trump’s political pressure and escalating trade tensions could put the Fed in a tough spot.
Last week, market volatility spiked on speculation that Trump might remove Fed Chair Jerome Powell. The US dollar briefly weakened on the news, though a statement from the White House helped calm the markets. Even so, the incident reignited concerns about the Fed’s independence. Political risk like this could add to short-term volatility in the dollar.
Limited Support From Bond Yields
US bond yields have been supporting the dollar’s strength in recent weeks. However, the yield struggled to break above the 4.50% level, which limited further gains in the . After Friday’s bond purchases, the 10-year yield dropped below 4.40%, which could slow the dollar index’s upward momentum in the short term.
This week, markets will closely watch key data releases, including , , , and a . Earnings reports from major companies like Coca-Cola Co (NYSE:), Alphabet (NASDAQ:), Tesla (NASDAQ:), and IBM (NYSE:) will also influence risk sentiment toward the dollar.
Meanwhile, no rate change is expected at the upcoming . However, comments from ECB President Christine Lagarde could still impact dynamics.
The US dollar is struggling to find clear direction amid a highly uncertain environment. Internally, shifting expectations around Fed rate policy and political tensions — including pressure on Fed Chair Powell — are creating volatility. Externally, concerns around August 1 tariffs, ongoing trade negotiations, and the upcoming ECB meeting are also weighing on sentiment.
While the dollar’s recovery trend continues, gains remain limited. In the short term, any upward move will largely depend on Trump’s statements, tariff developments, and the Fed’s response to growing political pressure.
US Dollar Technical Outlook
The US Dollar Index (DXY) has been trying to break above the 98.35 resistance level since last week, after rebounding from 96.30 earlier this month. Holding above this support could keep bullish momentum intact. However, for the rally to strengthen, bond yields need to climb back above 4.50% and the Fed must send a clearer policy signal.
Technically, support may be forming near the 98 mark. A break below this could signal the start of a correction, potentially dragging the index back toward 96. But if the DXY can close above 98.35 consistently, the uptrend may extend toward 99.60. For now, overcoming resistance is key — otherwise, the recovery may remain shallow.
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