The US Dollar Index (DXY), currently trading at 108.35, is gaining momentum on Friday, spurred by several significant factors ahead of the weekend. A major contributor to this surge is US President Donald Trump’s announcement of tariffs on Mexico and Canada. The Trump administration will impose a 25% tariff on $900 billion worth of goods from both nations. Additionally, Trump has threatened 100% tariffs on BRICS countries if they attempt to replace the US Dollar with a new currency in international trade, further fueling the DXY’s rise.
Another key driver behind the DXY’s bullish move is the widening rate differential between the US and other major economies. Recent data from Germany, which pointed to weaker inflation, has intensified speculation that the European Central Bank (ECB) might reduce interest rates, exacerbating the gap between US and European yields. This dynamic has been supporting a stronger US Dollar, as investors seek higher returns from US assets.
However, the latest Personal Consumption Expenditure (PCE) data for December had little impact on further widening the rate differential. The PCE figures were largely in line with expectations, turning the release into a non-event for market participants.
Looking ahead, Monday’s market open could be turbulent as traders react to the potential tariffs on Mexico and Canada. The CME FedWatch tool suggests an 82% likelihood of no change to the Federal Reserve’s policy rate in the upcoming March meeting, signaling stability for the US Dollar in the near term.
Also Read: GBP/USD Steady Above 1.2400 as Trump’s Tariff Threats Boost US Dollar Strength
From a technical standpoint, the DXY is expected to face volatility over the weekend, especially with the potential for tariffs being implemented as early as Saturday. Support for the DXY is seen around 107.67, with resistance near 109.30. If the index surpasses this level, it may continue its ascent toward 110.79, signaling a continuation of bullish momentum.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of FXRift.com . Before making any investment decisions, you should always conduct your own research. FX RIFT is not responsible for any financial losses.
