The US Dollar Index (DXY), which compares the US Dollar to six other major currencies, remained below 99.50 early on Friday in Europe. Concerns over tariffs affecting the US economy have kept the Greenback subdued, with trading activity expected to be light due to the Good Friday holiday.
Federal Reserve Chair Jerome Powell made hawkish comments, indicating the risks posed by a sluggish economy and persistent inflation, which offered some support to the US Dollar. Meanwhile, President Donald Trump criticised Powell’s slow pace in cutting interest rates and expressed a desire for quicker removal.
Fed Rate Cut Expectations
Traders anticipate around 86 basis points of Fed rate cuts by the end of 2025, with the first reduction in July. Trump mentioned China’s recent overtures, expressing hope for a trade agreement within three to four weeks.
The US Department of Labor reported a drop in Initial Jobless Claims to 215,000 for the week ending April 12, while Continuing Jobless Claims increased to 1.885 million. The US Dollar, the world’s most traded currency, has over 88% of global foreign exchange turnover. The value of the US Dollar is primarily influenced by the Federal Reserve’s decisions on monetary policy.
What’s already clear from the numbers and the remarks is that monetary policy direction remains the deciding force behind the dollar’s path, especially in the absence of strong new data. The Index staying beneath the 99.50 mark hints at persistent market caution, not necessarily weakness in fundamentals, but rather a short-term lack of appetite. We’re currently sitting in a low-volume period, and with the Good Friday holiday keeping market activity subdued, short-term volatility is less likely to offer meaningful indicators.
Although Powell’s remarks were meant to reassure, they served to cement concerns about where rates are headed. His reference to inflation not coming down fast enough, alongside an economy that’s not quite hitting the breaks, draws a line under the Fed’s probable stance: they are unlikely to move quickly unless something glaring shifts. That’s a fairly straight message. From our vantage point, the Federal Reserve Chair is effectively setting a floor under the US Dollar for now, but not advancing it either.
Political and Economic Influence
Now contrast that with the political pressure from Trump, who is openly urging more decisive rate cutting. That’s not a disagreement; it’s a divide in strategy. Where Powell sees room for caution, Trump sees urgency. This divergence won’t decide Fed action, but will colour expectations, especially with elections on the horizon. Importantly, the market is not buying into the idea of aggressive easing just yet. Expected cuts totalling 86 basis points by end-2025 reflect a tempered view—there’s still hesitancy to price in more aggressive movement.
In the background, the mention of China and “trade hope” within weeks is worth keeping in mind, but by now we’ve learned to treat front-end trade optimism carefully. Traders have been burned before on premature positioning. It might be better used as a sentiment driver rather than a reliable entry signal.
The labour data point—Initial Jobless Claims falling while Continuing Claims rose—paints a murky picture. Either some temporary hires cleared off the books quickly or the underlying trend is poorer than surface data implies. What matters more for positioning is that the labour market remains comfortably away from panic territory, which reinforces the Fed’s cautious approach. Unless harder data emerges to change this outlook, the current rate path remains intact.
Derivatives tied to rate cut probabilities or volatility spikes in response to policy shifts might find limited opportunity in the next few sessions. Positioning right now is largely narrative-driven—headlines, expectations and speeches are driving it more than real displacement. Given light market participation and holidays in play, spreads may widen unexpectedly and liquidity traps might mislead shorter-term allocation.
As it stands, the Greenback still commands giants’ share in the global market, which naturally entrenches its influence regardless of domestic hiccups. There’s little reason for outsized directional shifts at this point. Rate expectations haven’t moved enough to lift the steam off implied volatilities. Watching how open interest around front-end swaps behaves in the next few weeks will say more than any headline. The quiet now could mislead, but beneath it, pressure continues to gather.
