US Dollar midly up as markets digest CPI data
- DXY remains muted as inflation slows faster than expected.
- China and the EU vow retaliation over US tariffs.
- Ukraine-Russia ceasefire deal under discussion.
- US Dollar Index stabilizes in the mid-103.00 area.
The US Dollar steadies on Wednesday, with DXY hovering around 103.50 as traders digest the latest Consumer Price Index (CPI) data. The February inflation report showed both headline and core figures cooling faster than anticipated, reinforcing expectations of softer price pressures ahead of recently imposed United States (US) tariffs. US President Donald Trump was also on the wires, and markets are assessing his words.
Daily digest market movers: Inflation cools, trade tensions rise
- The latest CPI report showed inflation decelerating in February, with both monthly and yearly figures coming in below expectations.
- Monthly headline inflation registered at 0.2%, down from 0.5% in January, while core inflation eased to 0.2%, softer than the expected 0.3%.
- On a yearly basis, headline inflation slipped to 2.8% from 3.0%, while core inflation fell to 3.1% from 3.3%.
- On the global trade front, China reaffirmed plans to retaliate against recent US tariffs, adding to trade concerns.
- EU Commission President Ursula von der Leyen confirmed that the bloc is preparing to impose countermeasures on April 13.
- Diplomatic efforts to end the Ukraine-Russia conflict gained traction, with a potential ceasefire deal brokered by the US now awaiting Russia’s response.
- During a press event with Ireland’s Prime Minister, US President Donald Trump reiterated his grievances over European trade policies, highlighting his intention to impose tariffs on imported cars.
DXY technical outlook: Key support levels in focus
The US Dollar Index (DXY) remains under pressure, holding just above multi-month lows near 103.50. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest oversold conditions, prompting traders to pause aggressive selling. Despite the recent slump, a break below 103.30 could open the door for further losses, while a rebound above 104.00 may trigger short-term recovery attempts.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
