Tin tức thì trường
19.02.2025, 20:20

US Dollar gains traction as Trump expands tariffs, FOMC minutes

  • The US Dollar Index holds above 107.00 amid trade policy concerns.
  • Trump extends 25% tariffs to pharmaceuticals and semiconductors starting in April.
  • Fed officials discuss slowing balance sheet runoff amid renewed debt ceiling concerns.
  • DXY recovers but remains uncertain with key technical levels in focus.

The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, trades slightly higher on Wednesday. Investors weigh the Federal Reserve’s (Fed) policy stance and the latest trade measures announced by US President Donald Trump, who confirmed that pharmaceutical and semiconductor imports will face 25% tariffs starting in April. At the time of writing, the DXY remains above 107.00 but struggles to establish a clear direction.

Daily digest market movers: US Dollar firms as Fed weighs balance sheet strategy

  • US President Donald Trump confirms 25% tariffs on pharmaceutical and semiconductor imports are set to begin in April.
  • Auto tariffs also reaffirmed at 25%, adding pressure to global trade tensions.
  • Trump shifts focus to trade policy after a lack of progress in Russia-Ukraine peace talks.
  • Fed Meeting Minutes highlight concerns over balance sheet reduction and debt ceiling impact.
  • Fed officials indicate that slowing or pausing balance sheet runoff may be appropriate.
  • Some participants believe trade and immigration policies could complicate the disinflation process.
  • Most Fed officials view risks to inflation and employment as roughly balanced.
  • A few Fed officials argue that inflation risks outweigh employment risks in policy decisions.

DXY technical outlook: Bulls need to reclaim key resistance levels

The US Dollar Index maintains modest gains above 107.00, but upside momentum remains limited. Despite the rebound, the 20-day Simple Moving Average (SMA) remains a key resistance level after being lost last week.

The Relative Strength Index (RSI) continues to hover in bearish territory, while the Moving Average Convergence Divergence (MACD) reflects steady downside pressure. A drop below the 100-day SMA at 106.30 would reinforce a negative short-term outlook. Bulls need stronger momentum to challenge the 107.50 resistance level and establish a more sustained recovery.

 

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 holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

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