US Dollar Holds Ground as Trump Escalates Trade War, Fed Minutes Signal Rate Cuts

US Dollar Holds Steady as Trump Escalates Trade War, Fed Hints at Rate Cuts

Thursday, July 10 – The US Dollar (USD) is holding firm in early European trading, recovering from earlier losses as traders respond to escalating trade tensions and increasingly dovish signals from the Federal Reserve.

DXY Stabilizes After Asian Dip

The US Dollar Index (DXY) rose modestly to 97.57, rebounding from the session’s low of 97.27, after a weaker Asian session driven by falling Treasury yields and lower appetite for risk. The market showed resilience as attention turned to the Fed's June FOMC meeting minutes, which revealed that a majority of policymakers expect rate cuts later this year.

Trump Broadens Tariff Offensive

President Donald Trump intensified the trade conflict, posting a second round of tariff letters on Truth Social. The new batch targets seven countries, including:

• Philippines
• Brunei
• Moldova
• Algeria
• Iraq
• Libya
• Sri Lanka

These countries face import duties of 20% to 30% starting August 1, deepening concerns over a potential global trade war.

Momentum Indicators Still Cautious

Despite the USD's modest rebound, technical indicators reflect a fragile recovery:

• RSI remains below 50, signaling weak momentum
• MACD is improving, but gains remain tentative
• Treasury yields continue to trend lower, reinforcing dovish sentiment

What's Next for the USD?

Traders will closely watch upcoming CPI inflation data and further Fed commentary to assess the outlook for monetary policy. A broader risk-off environment could provide further support for the Dollar in the short term, especially if trade tensions escalate further.

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