US Dollar Reaction: Gains Reversed as Politics Overshadow Fundamentals.
The US Dollar Index (DXY) gave up early gains and returned to flat levels near 99.40 after the White House press briefing shook market sentiment. The initial optimism following Scott Bessent’s comments fail to hold as no imminent trade breakthroughs announced.
Instead, the spotlight shifted to Amazon, as Karoline Leavitt, speaking on behalf of President Trump, branded the retail giant’s decision to disclose tariff impacts on products as “hostile” and politically motivated. This statement rattled Wall Street and added a new layer of political tension to the ongoing trade disputes.
The move perceived by many investors as an attempt to suppress corporate transparency ahead of expected price hikes, and the market interpreted it as a clash between government policy and private sector accountability.
Economic Indicators Offer Little Support to the Dollar
- The March Goods Trade Balance widened to -$162 billion, deeper than February’s -$147 billion, pointing to persistent US external imbalances.
- Wholesale Inventories rose by just 0.5%, below the forecast of 0.7%, indicating tepid stock accumulation.
- The House Price Index disappointed at +0.1%, hinting at a cooling real estate market.
- The JOLTS Job Openings report is due later today, expected at 7.5 million, a sign of potential hiring caution amid tariff-related business uncertainty.
The economic tone remains soft and does little to provide the US Dollar with upside momentum, especially as bond yields ease and the Fed rate cut narrative builds.
Fed Policy Outlook: June Cut Gaining Momentum
According to the CME FedWatch Tool:
- May meeting: 91.1% chance of no change, 8.9% chance of a cut.
- June meeting: 62.6% chance of a 25-bps rate cut.
Traders are increasingly pricing in mid-year easing, especially with growth data weakening and political distractions clouding fiscal and trade policy clarity.
Market Sentiment and Cross-Asset Impact
- US equity futures turned red after the Amazon comment, with tech shares leading the dip.
- European equities, although still positive, also lost ground following the press conference.
- US 10-year Treasury yields slipped to 4.21%, as bond buying intensified amid risk aversion.
- EUR/USD, which had edged lower earlier, may stabilize as the USD narrative weakens again.
Conclusion: Political Tensions Erode Dollar’s Edge.
The US Dollar is caught between economic headwinds and political volatility. The administration’s combative stance toward Amazon raises fresh concerns about government interference in corporate transparency, just as the market is seeking clarity on inflation, tariffs, and the Fed’s next move.
If economic data continues to disappoint and the trade narrative remains politically charged, USD strength could be short-lived, especially against currencies backed by hawkish central banks or improving economic data.
