US Dollar Index (DXY) experienced one of its steepest weekly declines since November 2022, pressured by geopolitical tensions and weakening economic indicators. Optimism surrounding a potential Ukraine peace deal bolstered the Euro and Sterling Pound, exerting downward pressure on the USD. Additionally, weak US macroeconomic data, including a dip in the ISM Manufacturing PMI to 50.3 and lacklustre job data (nonfarm payrolls at 151K vs. 160K expected) fueled concerns over slowing growth. Trade tensions escalated as the US imposed fresh tariffs of 25% on goods from Canada and Mexico, and 10% on China prompting swift retaliation, adding to fears of a broader economic slowdown.

Amid these headwinds, the euro surged past $1.08, buoyed by expectations of increased Eurozone fiscal stimulus, including Germany’s €500 billion infrastructure fund and the EU’s €800 billion defence allocation. British pound also climbed above $1.28, supported by lowered UK interest rate easing expectations and reduced US tariff exposure. While President Trump described the economy as undergoing a “period of transition,” Fed Chair Powell reassured markets that the US economy remains stable with no urgency for policy adjustments. However, Market Participants will closely watch upcoming inflation data, PPI figures, JOLTS job openings, and the Michigan consumer sentiment index for further direction. From a technical perspective, DXY is testing key support at 103.50, with a break below potentially opening the door to 102.80 and 102.00, while resistance at 104.80 remains a critical barrier to any sustained rebound.