Last week, President Donald Trump’s tariff threats once again boosted the US dollar, but as there were signs that the US economy was cooling down and concerns that the trade war would further weaken the dollar, more and more investors began to short the US dollar.
More and more dollar bears include asset management companies Invesco and Columbia Threadneedle as well as hedge fund Mount Lucas Management. On Wall Street, Morgan Stanley and Société Générale have warned clients that going long on the dollar is an overcrowded trade that may not last.
They no longer pay attention to the daily fluctuations caused by tariff announcements, but believe that the situation surrounding the US dollar will only get darker. The prospect that import tariffs may reignite inflation and keep interest rates high does not offer them any support. Now they are worried that all the uncertainties surrounding tariffs may undermine the economy, which has already shown signs of cooling.
The result was that expectations of a rate cut by the Federal Reserve intensified, weakening the appeal of the US dollar. As investors began to consider Trump’s domestic and foreign policies, including cutting federal spending and undermining the peace agreement between Russia and Ukraine, the atmosphere of American economic exceptionalism that supported the dollar’s 7.1% rise last quarter is gradually fading.
“I don’t think he can raise the dollar much more because it’s already very expensive,” said Kit Juckes, head of foreign exchange strategy at Société Générale in London. “But can he lower it? Absolutely, if he damages the US economy.”
Against the backdrop of a risk-on wave that has lifted stock markets and US Treasury yields, the world’s major reserve currency, the US dollar, is now nearly 2% lower than its post-election peak before Trump took office.
On Friday, the US dollar continued to rise after a fierce confrontation between US President Trump and Ukrainian President Zelensky, leading to the breakdown of a peace agreement with Russia and a key minerals deal. In an interview after the White House farce, Finance Minister Scott Bessent reaffirmed that tariffs could bring in considerable revenue.
However, renewed attention to European defense could eventually boost the region’s currencies against the US dollar. On Monday morning in Asia, the euro strengthened as European leaders gathered to discuss increasing defense spending and ensuring Ukraine’s security following a ceasefire agreement brokered by the United States. The Polish zloty and Romanian leu also rose along with other Scandinavian currencies, as expectations of further spending are seen as promoting growth in the region.
Technical analysis:
Gold: After experiencing a habitual pullback in the late hours of Friday, the price continued to rebound from the bottom on Monday, rising from the overnight low of 2830 to above 2870. For the day, we suggest actively seeking a pullback to the 2840/50 area to form a new demand zone and attempting a buy limit operation. For detailed positions, please consult the plugin.
(15-minute Gold Chart)
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After the release of the PCE data, the Nasdaq index price fluctuated and broke through the 20,700 level, temporarily easing the downward pressure. Pay close attention to the support performance of the demand zone at 20,760 within the day and you can attempt 1-2 buy limit operations. However, a series of employment data will be released this week. If the expectation of the Fed cutting interest rates is not strong, the price will not have a trend of upward movement. For detailed positions, please consult the plugin.
(15-minute Nasdaq Index chart)
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Crude oil: After the price retraced to around 69, it stopped falling and stabilized, initiating a rebound. Within the day, we continue to monitor the performance of the demand area around 69.30/69.00 for retracement, and can attempt 1-2 buy limit operations. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key financial data and events to focus on:
17:30 UK Markit/CIPS Manufacturing Purchasing Managers’ Index for February
18:00 Eurozone February consumer price index preliminary value (year-on-year)
22:00 US ISM Manufacturing PMI for February
