- The US Dollar rebounds, avoiding a fresh five-month low in the Dollar Index.
- Traders react to Germany’s decision to increase spending by €0.5 trillion.
- The Dollar Index recovers as geopolitical discussions between Putin and Trump unfold.
The US Dollar Index (DXY), which measures the USD’s performance against six major currencies, remains flat at 103.60 on Tuesday. Market sentiment remains cautious as geopolitical developments unfold, particularly a high-stakes discussion between US President Donald Trump and Russian President Vladimir Putin.
The meeting, focused on territorial disputes and asset division in Ukraine, has heightened concerns over regional stability. This situation has prompted speculation that the European Union (EU) and NATO may ramp up defense spending in response to potential shifts in territorial control.
Meanwhile, tensions have escalated in the Middle East, as Israel launched attacks on Hamas positions in Gaza, effectively ending the ceasefire that had been in place since January. The move follows accusations from Israel and the US that Hamas failed to uphold its commitment to releasing hostages. This escalation raises fears of further Houthi rebel attacks in the Red Sea and potential retaliatory strikes from Hamas, adding to global geopolitical risks.
With uncertainty mounting, any new developments could serve as a catalyst for further movements in the DXY, potentially pushing it toward a six-month low below 103.00.
Daily Market Movers: Key Data and Market Trends
Economic Data Highlights
- Building Permits (February): 1.456 million, slightly above the 1.45 million estimate but lower than 1.473 million in January.
- Housing Starts (February): 1.501 million, surpassing expectations of 1.38 million and higher than 1.366 million in January.
- Export Price Index (February): +0.1%, beating forecasts of a -0.2% decline, following +1.3% in January.
- Import Price Index (February): +0.4%, exceeding the expected -0.1% drop and above +0.3% in January.
- Industrial Production (February): +0.7%, far surpassing the +0.2% consensus and stronger than January’s +0.5%.
Equity and Bond Market Update
- European stocks rise nearly 1%, driven by optimism over Germany’s potential spending increase.
- US equities decline nearly 1%, reflecting a mixed and divided trading session.
- The CME FedWatch Tool indicates a 99% probability of no rate changes at Wednesday’s Federal Reserve meeting, with a 21.5% chance of a rate cut in May.
- The US 10-year Treasury yield hovers at 4.30%, rebounding from a five-month low of 4.10% seen on March 4.
US Dollar Index (DXY) Technical Outlook
The DXY is testing the lower boundary of its recent range (103.18 - 103.99) as downside pressure mounts. Weakening US economic data and geopolitical factors favoring the Eurozone—such as Germany’s potential spending boost and the Trump-Putin call on Ukraine—increase the likelihood of further declines.
Key Levels to Watch:
- Upside: A potential rebound could push the DXY to 104.00, with a breakthrough paving the way toward 105.00, where the 200-day Simple Moving Average (SMA) acts as strong resistance. Beyond that, targets include 105.53 and 105.89.
- Downside: If US yields decline further, 103.00 serves as an initial bearish target, with 101.90 in play if broader market sentiment turns against long-term USD holdings.
With global uncertainties in focus, traders remain on edge for potential market shifts.
