US Dollar drifts on Trump tariff doubts – Scotibank
07.01.2025, 12:45

US Dollar drifts on Trump tariff doubts – Scotibank

US Dollar (USD) retains a softer undertone, leaving the DXY trading close to the lows seen around the holiday period, Scotibank’s Chief FX Strategist Shaun Osborne notes.  

DXY support is 107.75 intraday

“It’s not a case of significant dollar weakness, of course, but the currency has been on a strong run and remains quite significantly overvalued relative to its short run fair value estimate. USD seasonal trends are bullish in Q1 typically, but we can see that the USD continues to track its post 2016-election performance very closely, which might herald a downturn in its performance shortly if that pattern continues to hold.”

“Essentially, traders and investors are long USDs, and positioning may be prone to some liquidation pressure if the USD continues to soften. There was a lot going on yesterday. Despite the president-elect’s denial that tariffs would only be applied selectively, the USD traded broadly lower over the session and only managed to strengthen a little from the intraday low following Trump’s comment.”

“US yields remain firm. The US 10Y is nearing 4.70%, just shy of last April’s peak around 4.74%. Yields are firm/firmer elsewhere, however, meaning that spreads are not necessarily moving in the dollar’s favour. This morning’s US data run may bring mixed news on trade, JOLTS and ISM Services. Barkin (non-voter) speaks at 8ET. DXY support is 107.75 intraday. Loss of support here will tilt near-term risks towards more softness.”

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