The US dollar index rose above the 104.3 mark, reaching its highest level since March 4, as investors assessed the latest PMI data and awaited further clarity on President Trump’s trade policies ahead of the April 2 deadline for his reciprocal tariffs.
Dollar nears three-week high
The dollar’s strength was underpinned by growing uncertainty surrounding global trade conditions, alongside expectations that US economic resilience could keep the Federal Reserve cautious on rate cuts.
The latest PMI survey revealed that US business activity picked up in March, with a strong rebound in the services sector helping to offset a renewed decline in manufacturing output. However, concerns remain about the overall economic outlook, as business expectations for the year ahead dropped to their second-lowest level since October 2022, reflecting anxieties over demand, tariffs, and broader policy shifts from the new administration.
Developments on tariffs
On the trade front, President Trump suggested on Friday that there could be “flexibility” in his tariff plan, easing some market fears of an all-out trade war. Weekend reports further indicated that the measures might be narrower in scope than initially feared, potentially exempting certain industries or offering more targeted restrictions rather than sweeping increases.
Meanwhile, on the monetary policy side, the Federal Reserve reiterated its patient stance on interest rates, reinforcing that it is in no hurry to cut, despite having signaled two rate reductions later this year. Fed Chair Jerome Powell emphasized the importance of incoming data, particularly inflation and labor market trends, in determining the timing of any policy adjustments.
Traders to monitor US data
Looking ahead, traders will be closely monitoring upcoming economic indicators, including inflation reports and consumer confidence data, to gauge whether the dollar’s rally has further room to run or if shifting rate expectations could bring renewed volatility to currency markets.
