Why Is the US Dollar Index Stuck Below 99.50? | Key Factors Influencing DXY Amid Trade Tensions

The usdt vs usdcUS Dollar Index (DXY) continues to hover below the 99.50 threshold as market participants digest mixed signals from policymakers and ongoing trade negotiations. With trading volumes thinning ahead of the Good Friday holiday, the Greenback finds itself caught between competing fundamental forces.

Federal Reserve Chairman Jerome Powell's recent comments have injected fresh uncertainty into currency markets. His warning about stagflation risks - the toxic combination of sluggish growth and persistent inflation - has traders reevaluating their positions. This comes as President Trump publicly criticized the Fed chief's cautious approach to rate cuts, creating unusual tension between the White House and the central bank.

Market-implied probabilities now suggest an 86% chance of monetary easing by year-end, with July emerging as the most likely starting point for rate reductions. The CME FedWatch Tool reflects this shifting sentiment, though some analysts caution that premature cuts could undermine the dollar's relative strength.

On the trade front, President Trump's optimistic timeline for a China deal (3-4 weeks) provides some support to risk sentiment. His remarks about avoiding further tariff escalations suggest both sides may be nearing compromise. However, the potential economic fallout from existing trade barriers continues to weigh on growth projections.

Recent labor market data presents a mixed picture. While initial jobless claims showed unexpected improvement, rising continuing claims hint at potential softening in employment conditions. This dichotomy adds complexity to the Fed's policy calculus as it balances inflation concerns against growth risks.

Technical analysts note that the DXY remains rangebound between key support and resistance levels. The absence of clear directional momentum reflects the market's wait-and-see approach ahead of crucial developments in both trade negotiations and monetary policy.

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