Dollar Index Finds Support

Trade Tensions Keep Dollar Under Pressure

US Dollar Index (DXY) trims some losses after bouncing from the 98.00 area – FXStreet

The US Dollar Index found some support at the 98.00 area during Friday’s European session, trimming part of its recent losses. However, the Index remains vulnerable after depreciating nearly 1.30% in a four-day sell-off.

Trade wars, Fed easing hopes weigh on the USD

The trade rift with China escalated on Thursday after President of the United States affirmed that the country is already in a trade war with the Asian nation.
Later in the day, Treasury Secretary Scott Bessent referred to China’s trade negotiator as an “unhinged wolf,” which further fueled tensions.

Fed signals further monetary easing

The Federal Reserve continues to send signals of additional monetary easing ahead.
On Thursday, Fed Governor Christopher Waller stated that the central bank should cut rates again in October, noting that the impact of tariffs on inflation remains moderate.
Stephen Miran, the latest appointment by the President of the United States to the Fed’s board, reiterated the need for more aggressive rate cuts.
These dovish remarks have reinforced market expectations for at least two more rate cuts before year-end.

Data outlook amid government shutdown

With the United States government shutdown delaying the release of key economic data, the Federal Reserve remains the primary source of information for markets.
Later today, the Fed will publish September’s Industrial Production report, expected to show a modest 0.1% increase.
Additionally, St. Louis Fed President Alberto Mussalen may provide further clues about the central bank’s monetary policy path.

Conclusion

The US Dollar Index has managed to bounce from the 98.00 support area, but upside momentum remains capped by escalating trade tensions with China and growing expectations of further Fed rate cuts. Analysts suggest that unless geopolitical risks ease and economic data surprises to the upside, the dollar will likely remain under pressure.