The US Dollar Index (DXY) is holding steady above the 98.00 level during Tuesday’s Asian session, as traders weigh renewed geopolitical risks and await key US inflation data. The Greenback’s four-day winning streak has paused, but rising safe-haven demand and hawkish rhetoric from the Fed continue to provide underlying support.
🔹 Geopolitical Tensions Fuel Safe-Haven Demand for USD
The US Dollar remains underpinned by heightened global tensions after President Donald Trump issued a stern warning to Russia, threatening “very severe” tariffs if a peace agreement is not reached within 50 days. In a bold move, Trump also signaled potential secondary sanctions on nations that continue to import Russian oil, escalating the risk of a broader economic standoff.
Key Developments:
- Trump confirmed that European allies will purchase US-made weapons, including Patriot missile systems, to bolster Ukraine’s defense against Russia.
- The US will impose a 17% duty on fresh tomato imports from Mexico, following the breakdown of trade talks.
- A previously announced 30% tariff on EU and Mexican imports will take effect on August 1, alongside proposals for 15%–20% blanket tariffs on other trading partners.
These developments have strengthened the Dollar’s appeal as a safe-haven asset, though traders remain cautious ahead of fresh US inflation figures.
🔸 US CPI Data in Focus
Markets now turn their attention to the June Consumer Price Index (CPI) report, due later today. A hotter-than-expected reading could reinforce expectations for the Fed to maintain a restrictive monetary stance, further supporting the Dollar.
- If CPI rises sharply, it could justify delaying rate cuts, especially amid new tariff-driven inflation risks.
- A weaker CPI print might increase expectations of a policy pivot later this year.
🗣️ Fed Commentary: No Rush to Cut Rates
Cleveland Fed President Beth Hammack offered a cautious yet firm outlook, stating the US economy remains fundamentally strong despite sticky inflation. She emphasized the need to keep policy restrictive, particularly in light of uncertainty over the full inflationary impact of tariffs.
“We don’t yet know what the full impact of the tariffs will be… There’s no imminent need to cut rates,” Hammack stated.
📈 DXY Technical Snapshot
- Current level: 98.10
- Support: 97.60
- Resistance: 98.50, then 99.20
The Dollar Index is consolidating just above 98.00. A break above 98.50 could signal renewed upside momentum, especially if inflation data beats expectations. Conversely, a move below 97.60 would suggest a short-term reversal.
🧠 Outlook: USD Gains May Resume Post-CPI
With geopolitical risks rising and tariff-related inflation becoming a real concern, the US Dollar remains well-positioned to benefit from safe-haven flows. Today’s CPI data will be crucial in determining whether the Fed stays the course or signals a dovish shift.
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