- The US Dollar dominates markets after President-elect Trump unveils new tariff measures.
- Market reactions are mixed, with equities recovering earlier losses, while the US Dollar Index fluctuates around 107.00.
- The Canadian Dollar, Mexican Peso, and Chinese Yuan are the biggest losers against the Greenback.
The US Dollar (USD) dominated markets on Tuesday after President-elect Donald Trump announced via social media that his administration will impose an additional 25% tariff on imports from Canada and Mexico, along with a further 10% on Chinese goods, on top of the previously announced 60%. This news causes a negative market reaction, with global equities posting losses and US bond prices falling (yields rising).
The US economic calendar includes housing data on Tuesday, with the Housing Price Index for September and New Home Sales for October. These figures will offer insight into whether the US housing market is cooling, which has been a key driver of inflation. Later in the day, the Federal Reserve will release the Minutes from its November 7 meeting.
Daily Digest: Market Movers & US Housing Data Ahead
- At 14:00 GMT, the Housing Price Index for September is set to be released, with a forecasted reading of 0.3%, matching the previous month’s result.
- At 15:00 GMT, the Conference Board Consumer Confidence Index for November will be published, though no forecast is available; the previous reading stood at 108.70.
- At 15:00 GMT, New Home Sales data for October is expected to show a slight decline to 0.73 million units, down from 0.738 million in the previous month.
- The Richmond Fed Manufacturing Index for November will also be released at 15:00 GMT, with a forecasted contraction of -10, a slight improvement from the previous -14.
- At 19:00 GMT, traders will focus on the release of the Fed’s Federal Open Market Committee (FOMC) Minutes from the November meeting, offering potential insights into December rate cut expectations.
- Equities remain weak globally, with losses across Japan, China, and Europe, though most losses are under 1%. US equity futures are bucking the trend, showing positive movement for Tuesday.
- The CME FedWatch Tool currently prices in a 59.6% chance of a 25 basis point rate cut at the Fed's December 18 meeting, with a 40.4% chance that rates will remain unchanged.
- The US 10-year benchmark rate is trading at 4.29%, significantly lower than the 4.50% high seen on November 15.
US Dollar Index Technical Analysis: Mixed Signals
The US Dollar Index (DXY) struggles to gain momentum despite President-elect Donald Trump’s announcement of additional tariffs on Canada, Mexico, and China. While the weaker Canadian Dollar (CAD) component is being offset by a stronger Euro (EUR) and Swedish Krona (SEK), the DXY’s muted reaction suggests that the tariff news hasn’t triggered a significant move.
The DXY reached a fresh two-year high at 108.07 on Friday, marking the first key level to watch for a breakout. Above this, the 109.00 level will be the next resistance point. On the upside, October 2023 support at 109.36 will be crucial.
On the downside, support is found at 106.52, the double top from May. A deeper drop could find support around 105.53, the April 11 high, with 104.00 acting as a key level to watch. If the DXY falls toward 104.00, the big figure and the 200-day Simple Moving Average at 103.98 should help prevent further declines
