The dollar index held steady on Wednesday, maintaining a sideways trading pattern this week as investors remained on edge ahead of President Donald Trump’s latest tariff announcement, which he referred to as “Liberation Day.”
Dollar steady ahead of tariff rollout
The White House confirmed that the new reciprocal tariffs on nations imposing duties on US goods would take effect immediately, though Treasury Secretary Scott Bessent emphasized that the measures would function as a “cap,” offering countries an opportunity to negotiate reductions by adjusting their own trade policies.
Meanwhile, economic data released on Tuesday showed that US factory activity contracted in March for the first time this year, weighed down by weaker demand and higher costs, as businesses struggled with the fallout from existing and anticipated tariffs. Notably, prices paid by manufacturers continued to climb for the second straight month, signaling persistent inflationary pressures. Additionally, job openings in February declined to their lowest level in over two years, suggesting a gradual cooling of the labor market. However, layoffs remained relatively low, indicating that employers were still reluctant to cut jobs amid an uncertain economic outlook.
Focus on labor data
Investors are now shifting their focus to key labor market data set to be released this week, including the ADP employment report on Wednesday and the highly anticipated nonfarm payrolls report on Friday, both of which could offer crucial insights into Federal Reserve policy. Any signs of labor market weakness could reinforce expectations for potential rate cuts later this year, while stronger-than-expected employment figures may complicate the Fed’s efforts to balance inflation control with economic growth. In the broader market, traders are also keeping a close watch on geopolitical developments, particularly US-China trade relations, as heightened tensions could further impact global currency movements and economic stability.
