US Dollar Index Recovers Above 97.50 on Fresh Tariff Worries

US Dollar Index Recovers Above 97.50 Amid Renewed Tariff Tensions

July 22, 2025 – Tredu Forex Desk

The US Dollar Index (DXY) has rebounded from Monday’s lows to trade just above 97.50 in early Tuesday action, buoyed by a cautious recovery in US Treasury yields and continued concerns over trade negotiations with the European Union and Japan.

Although the index is still about 1% below last week’s high of 98.50, this mild bounce reflects investors' shift to defensive positioning amid an uncertain geopolitical and economic backdrop.

Trade Impasse Pressures Sentiment

Negotiations between the US and the EU remain strained. Eurozone officials have expressed dissatisfaction with new US demands, which are stalling any breakthrough. The EU is reportedly preparing retaliatory anti-coercion measures targeting US services, procurement, and investment—a move that could spark a new front in the trade standoff.

Japan Talks Stalled Despite Top-Level Engagement

Simultaneously, Japan’s chief negotiator Ryosei Akazawa is in Washington seeking to break the deadlock in trade discussions. Yet progress remains elusive. President Trump added pressure on Tokyo Monday, citing lackluster US car and rice sales in Japan as sticking points. Meanwhile, Treasury Secretary Scott Bessent emphasized that the quality of the agreement matters more than speed.

Market Mood: Defensive and Range-Bound

The mixed signals and stalled negotiations have kept major FX pairs within familiar ranges, as traders prefer caution over risk. The DXY has managed a modest recovery after bouncing from 97.25, though it’s still underperforming compared to last week’s strong showing.