The US Dollar has gained value for three consecutive days, trading around 104.00. This follows reports of European countries planning to take greater responsibility for their defence, which could reshape NATO relations.
The US Dollar Index (DXY) is attempting to recover from the March low of 103.20. Pressure is mounting as the April 2 deadline for the US to impose reciprocal tariffs approaches, creating uncertainty in the markets.
Equities And Central Bank Caution
Equities are declining, with major benchmarks in China down over 1.50%. Central banks, including the Fed and the Bank of England, are currently cautious about the economic outlook due to tariffs.
The DXY’s closing above 104.00 could lead to further gains towards 105.00, while a drop could see it target 103.00 or lower. The upcoming week may see fluctuating market conditions depending on tariff developments.
The Dollar’s recent appreciation reflects a broader alignment of market sentiment with geopolitical expectations. The indication that certain European states may assume a larger defence burden suggests material shifts in international policy. Historically, such moves have altered trade relations, prompting recalibration of capital flows. Given the nature of ongoing discussions, investors appear to be hedging against possible knock-on effects rather than reacting directly to the headlines themselves.
With the Dollar Index rebounding from March’s low point, lingering doubts persist over whether this rally can be sustained. Much of this depends on the looming tariff deadline, where markets will likely remain tense. The prospect of reciprocal trade measures creates layers of uncertainty, as businesses with global supply chains reassess costs. Those engaged in risk-sensitive trades may find that volatility spikes in assets correlated to US dollar movements.
Stock markets are already displaying unease, with Chinese indices retreating swiftly. Pressure stems from concerns over restricted trade avenues that could emerge if tariffs tighten. Investors watching central bank behaviour have noted a more measured stance among policymakers, particularly at the Federal Reserve and the Monetary Policy Committee. The reluctance to commit to aggressive easing suggests policy adjustments may take longer to materialise.
Technical Outlook On The Dollar Index
On the technical side, the DXY hovering near 104.00 brings potential breakout scenarios into focus. A continuation towards 105.00 would indicate sustained strength in the greenback, which could pressure commodities and emerging market currencies. On the other hand, should downward momentum build, levels beneath 103.00 could open the door for a broader shift in sentiment. As the week progresses, attention will remain fixed on fiscal developments, ensuring that price action stays reactive and likely more volatile than in recent weeks.
