US Dollar Index Drops Below 98.00 Amid Trade Deal Doubts and Fed Rate Cut Expectations

US Dollar Index Drops Below 98.00 Amid Trade Deal Doubts and Fed Rate Cut Expectations

DXY Hits Three-Year Lows as Dollar Sell-Off Accelerates

The US Dollar Index (DXY), which tracks the greenback against a basket of major global currencies, has dropped below 98.00 for the first time since April 2022. The index is down 1.30% on the day, marking one of the steepest daily declines this year.

What’s Driving the Dollar Lower?

• Disappointing US CPI Data: Softer-than-expected consumer inflation in May has increased bets that the Federal Reserve will resume rate cuts as early as September.
• Trade Deal Uncertainty: Markets are increasingly skeptical of President Trump’s ability to negotiate effective trade agreements, especially following mixed signals on rare earth imports and EU talks.
• Fed-ECB Divergence: With the ECB signaling a slower easing pace, relative policy divergence is adding to downward pressure on the dollar.

Risk Aversion Not Helping the Dollar

In a surprising shift, risk-off sentiment is not supporting the US Dollar. Traditionally a safe haven in times of uncertainty, the USD is instead suffering due to internal policy doubts and external macro trends favoring alternative currencies like the Euro.

Related Reads on Tredu:

• EUR/USD Surges as ECB Holds Ground
• Soft US CPI: What It Means for September Rate Cut Odds
• DXY Technical Breakdown: How Low Can the Dollar Go?