The US Dollar Index (DXY) entered a bullish consolidation phase during Friday’s Asian session, hovering near a one-month high around the 100.85 level. Despite the pause in momentum, the index is on course to post gains for a third consecutive week, underpinned by a steady recovery from April’s multi-year low.
Investor sentiment around the US dollar received a boost after Federal Reserve Chair Jerome Powell signaled a cautious stance on monetary policy earlier this week. Powell noted significant uncertainty surrounding US trade tariffs, emphasizing that the prudent course of action is to wait for greater clarity—comments that dampen expectations for imminent interest rate cuts.
Optimism surrounding a recent US-UK trade agreement has also helped buoy the greenback, as markets interpret the deal as a potential model for future trade pacts. The prospect of broader international cooperation has helped ease fears of a looming trade war and its associated recession risks, further supporting the dollar’s outlook.
In addition, lingering geopolitical tensions—including the ongoing Russia-Ukraine conflict, rising instability in the Middle East, and friction along the India-Pakistan border—have reinforced the appeal of the US dollar as a safe-haven asset.
However, bullish momentum in the dollar has been tempered as traders await commentary from several key members of the Federal Open Market Committee (FOMC) scheduled later in the North American session. Their remarks are expected to provide fresh insights into the Fed’s policy trajectory, particularly the timing and scale of potential rate adjustments, and could serve as a catalyst for the next move in the DXY.
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