US Dollar Falls Amid Mixed PMI Data and Softer Tariff Comments

  • The Dollar Index remains under pressure, testing the 107.50 level after a sharp weekly drop of more than 2%.
  • The S&P Global Composite PMI points to slower growth at 52.4 in January, compared to 55.4 in December.
  • Markets now turn their attention to next week’s Fed decision.

The US Dollar Index (DXY), which measures the value of the Dollar against a basket of currencies, is experiencing sustained losses as it sinks below 107.50, its lowest level this week. President Trump’s softer tone on proposed tariffs on China added to the currency’s bearish sentiment. Meanwhile, economic data continued to show mixed signals, leaving investors cautious.

Market Drivers: US Dollar Falls on Economic Data, Trump’s Comments

  • The S&P Global Composite PMI fell significantly to 52.4 in January from 55.4 in December, showing a slower pace of expansion.
  • The manufacturing PMI rose to 50.1, beating forecasts of 49.6, reflecting a slight recovery in factory production activity.
  • The services PMI decreased to 52.8 from 56.8, signaling less momentum in services sector growth.
  • On Thursday, initial U.S. jobless claims rose to 223,000 for the week ending Jan. 18, up from the previous week’s revised figure of 217,000.
  • Continuing jobless claims rose by 46,000 to 1.899 million, highlighting growing challenges in the labor market.
  • As for the new administration’s plans, President Trump softens rhetoric on Chinese tariffs in Davos, suggesting a possible easing of trade tensions.

DXY Dollar Index Technical Outlook: Signs of Deeper Bearish Momentum

The US Dollar Index (DXY) has fallen below the key 108.00 level, showing continued vulnerability to bearish momentum. The RSI remains below 50, signaling lower relative strength, while the MACD histogram bars deepen into negative territory, suggesting further declines.

The 20-day SMA around 108.00 now acts as a critical resistance level. A failure to reclaim this threshold could lead to further losses with the next support zone seen near 107.00. On the contrary, a recovery above 108.00 could stabilize the Dollar’s outlook and limit further declines.

US Dollar FAQs


The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.


The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.


In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.


Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.

Source: Fx Street

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