US Dollar Index edges higher to around 98.85 in Monday’s Asian session.
Trump said the China situation “will all be fine.”
UoM Consumer Sentiment Index declined to 55 in October, stronger than expected.
Fears of a prolonged US government shutdown and Fed rate cut bets might cap the DXY’s upside.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a stronger note near 98.85 during the Asian trading hours on Monday. Markets hope for a compromise in the United States (US)-China trade war, lifting the US Dollar against its rivals.
US President Donald Trump on Friday had threatened 100% tariffs on China from November 1. China warned the US that it would retaliate if Trump failed to back down on his threat to impose levies on Chinese imports. On Sunday, Trump softened his tone, saying that China’s economy “will be fine” and that the US wants to “help China, not hurt it.” Traders hoped the US would temper its latest escalation of the trade war with China, helping limit the DXY’s losses.
Consumer confidence in the US deteriorated in early October, with the University of Michigan's Consumer Sentiment Index declining to 55.0 in its preliminary estimate from 55.1 in September. This figure came in better than the market consensus of 54.2. Meanwhile, the 1-year Consumer Inflation Expectation edges lower to 4.6% from 4.7% in September, and the 5-year Consumer Inflation Expectation remained unchanged at 3.7%.
The potential upside for the US Dollar might be limited amid uncertainty due to the US government shutdown. The US federal shutdown has entered its third week as Congress remains deadlocked on a funding plan, and the Senate isn’t scheduled to hold any votes until Tuesday.
Markets are pricing in nearly a 97% chance that the Federal Reserve (Fed) cuts rates by 25 basis points (bps) at its October meeting, while the possibility of an additional reduction in December is at 92%, according to the CME FedWatch tool.
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