The US Dollar Index (DXY) has fallen by 2.10%, dropping below 102.00 amid a backdrop of new tariffs imposed by the US government. Country-specific tariffs include a 10% minimum base case for 60 nations, with China facing a total of 54% starting Thursday.
The DXY’s decline follows a harsh correction in global markets, exacerbated by a strong sell-off in US equities. Recent economic releases show a rise in Challenger Job Cuts to 275,240 and an increase in Continuing Claims to 1.903 million. Initial Jobless Claims stood at 219,000, slightly better than expected.
Weakness In Services Data
The ISM Services PMI for March decreased to 50.8, missing the anticipated 53.0, with the employment component nearing contraction at 46.2. European equities fell between 2.00% to 3.00%, while the Nasdaq experienced a decline exceeding 4% on the day.
The CME Fedwatch Tool indicates a 74.7% chance that interest rates will remain at 4.25%-4.50% in May, with a 72.5% probability for lower rates by June. US 10-year yields traded around 4.04%, close to a five-month low of 4.01% amid a flight to safe-haven bonds.
Technical analysis shows DXY testing the 101.90 support level, and a potential decline towards 100.00 could occur if it breaks down. Resistance is noted at 103.18, with further levels at 104.00 and the 200-day Simple Moving Average at 104.90.
What we’ve been seeing unfold in recent sessions is a notable slump in the US Dollar Index after prolonged resilience. It’s fallen beneath the 102.00 handle, shedding just over 2%—a move that isn’t easily dismissed, especially considering the reintroduction of broad-based trade tariffs by Washington. These policy moves, including a sweeping 10% baseline applied to over 60 countries and a more punishing 54% figure for China, appear to have rattled confidence in the greenback’s short-term prospects.
This has come at the same time as harsh selling pressure on US tech-heavy equities, with the Nasdaq taking a hit of more than 4% in a single day. That alone would have been enough to stir volatility, but the macro data released in tandem only added weight to the bearish sentiment. Challenger Job Cuts have jumped relative to prior months, suggesting that labour market churn is accelerating faster than anticipated. Continuing Claims are rising steadily too, pointing to fewer people successfully re-entering work. The 219,000 Initial Jobless Claims figure might have looked stable at first glance, but context matters — and right now there’s evidence to believe that underlying conditions are softening meaningfully.
Market Sensitivity To Rate Outlook
The March ISM Services PMI also failed to reassure markets. A print of 50.8 may technically still point to growth, but the margin is razor-thin, and the real worry is in the employment sub-index, which came in at 46.2—fully in contraction territory. This doesn’t square well with expectations for a robust services sector, especially as it’s meant to be one of the more resistant parts of the economy.
European equities haven’t been immune to the weakness either, suffering between 2% to 3% losses, as risk aversion gathered momentum globally. It’s no surprise that yields on US ten-year Treasuries have continued to slide lower, hovering close to the five-month trough of 4.01%. That kind of move is typically associated with increased demand for safer assets. Perhaps more telling, however, is that the CME FedWatch Tool now shows a near 75% chance that rates will hold steady in May, with slightly lower odds now leaning toward a reduction in June. We’ve not seen this degree of consensus in quite some time.
Technically speaking, DXY is now testing that lower barrier at 101.90. If this level fails to hold, the next logical target sits around 100.00, which hasn’t been touched in many months. Resistance to the upside is fairly clear: prices would need to reclaim 103.18 to reverse sentiment. Beyond that, we’re looking at 104.00 and the longer-term average near 104.90.
In derivative markets, this backdrop reshapes how risk is being priced. As dollar volatility returns, short-term ranges have narrowed—implying less directional conviction. This is not the environment for momentum chasing. If price breaks below 101.90, the path may open toward heavier selling, and downside optionality becomes progressively more valuable. On the other end, if this support holds firm and macro data softens at a slower pace than expected, then a mean-reversion play back toward 103.00 provides symmetry.
We find that when Treasuries are being bid aggressively, especially as job and services data weaken, short-term rate expectations follow closely behind. One needs to be highly responsive now, not just reactive. The window for carry trades that rely on a stronger dollar may be narrowing, particularly if positioning remains heavy on the long side. Option prices, especially in the front end of the curve, are beginning to reflect more frequent gap risk events, with implied volatility up sharply in recent sessions.
This is not a directional story alone. It is a fluid repricing of risk assets, where yield curves, FX technicals, and rate expectations are all moving quickly and not always in sync. Patience helps little without precision now.
