04 Mar 2025

The US Dollar Index may receive support as rising global tariff tensions contribute to heightened risk aversion. The White House has confirmed that President Trump has enacted an order imposing 20% tariffs on imports from China.

Concurrently, the US Dollar is experiencing downward pressure due to a decrease in demand for safe-haven assets, driven by optimism surrounding a potential peace agreement in Ukraine.

The US Dollar Index (DXY), which evaluates the US Dollar (USD) against six prominent currencies, continues to decline for the second consecutive session, trading near 106.30 during European trading hours on Tuesday.

Nevertheless, the decline of the DXY may be limited as increased risk aversion, stemming from escalating global tariff tensions, bolsters the demand for the safe-haven US Dollar.

The White House announced on Monday that President Trump has signed an order to raise tariffs on Chinese imports to 20%, while similar actions regarding Mexico and Canada are still under consideration. Trump also emphasized that reciprocal tariffs would be implemented on April 2 for countries that impose duties on American goods.

In reaction, the Prime Minister’s Office of Canada indicated that the nation would impose 25% retaliatory tariffs on US imports starting Tuesday if the US tariffs are enacted. Concurrently, China’s Ministry of Commerce declared early Tuesday that it would undertake “necessary countermeasures” to safeguard its legitimate rights and interests.

Despite ongoing trade disputes, the US Dollar is experiencing downward pressure as optimism regarding a potential peace agreement in Ukraine diminishes the demand for safe-haven assets. European leaders have shown support for security guarantees for Ukraine, which has enhanced risk sentiment in global markets.

Economic data from the US on Monday presented mixed results. The ISM Manufacturing PMI fell to 50.3, below the anticipated 50.5 and down from January’s figure of 50.9. Conversely, S&P Global’s final Manufacturing PMI for February surpassed expectations at 52.7, showing improvement from its preliminary assessment.

Market participants are now focusing on crucial US labor data, with the ADP employment report scheduled for release on Wednesday and the Nonfarm Payrolls report on Friday. These statistics may provide additional insights into the Federal Reserve’s interest rate path.