Market Analysis – 21/04/25

USD Index Falls Below 100 Amid Rising Trade Tensions

The US Dollar Index (DXY) dropped 0.92% during Monday’s European session to 98.30, marking its lowest level since March 2022. The decline was largely driven by renewed trade tensions following the U.S. government's announcement of increased tariffs on several Asian countries.

Trade Policy Uncertainty Spurs Market Volatility
On April 2, the U.S. implemented “reciprocal tariffs,” with rates on some Asian imports jumping from 54% to 125%. Although a few nations were granted temporary exemptions, the overall shift triggered heightened market concerns over global trade stability.

Fed Maintains Wait-and-See Approach
Despite recent hawkish remarks from Fed Chair Jerome Powell—citing inflation risks from rising tariffs—markets remain uncertain about the central bank’s next moves. Powell stated that the Fed would require “greater clarity” before adjusting policy. San Francisco Fed President Mary Daly also noted that while rate cuts are still possible later this year, rising inflation and trade policy uncertainty may reduce the likelihood of aggressive easing.

Technical Pressure Builds on USD
Following the break below the key psychological level of 100, the DXY may remain under pressure, especially if trade risks persist and the Fed leans toward easing. The index could test late-2021 support levels in the near term.