The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, is currently trading at 108.25 at the time of writing after receiving a major boost on Friday (1/31). The first boost came from US President Donald Trump, who announced the first wave of tariffs on Mexico and Canada. The Trump administration will impose 25% tariffs on about $900 billion worth of goods from Canada and Mexico, Bloomberg reported. The US President also threatened to impose 100% tariffs on BRICS countries if they try to replace the US Dollar with a new currency in international trade.

The second boost came from the interest rate differential between the US and some other countries. For example, the German inflation release on Friday boosted bets for a rate cut by the European Central Bank (ECB). This led to a wider gap between US and European yields, which fueled a stronger US Dollar.

Unfortunately, the latest Personal Consumption Expenditure (PCE) data release for December failed to widen the rate differential. With all elements in line with expectations, the PCE release turns out to be a non-issue.(AL)

Source: FXstreet