The US dollar index traded around 97.5 on Tuesday, consolidating gains after a sharp two-day rebound fueled by strong US economic data and shifting expectations around Federal Reserve policy.
Data released on Monday showed a surprise expansion in US manufacturing activity, reinforcing signals of economic resilience and supporting expectations of stable corporate earnings. The figures prompted investors to reassess the pace and depth of potential interest rate cuts later this year, providing near-term support for the greenback.
Market attention now turns to Friday’s monthly US jobs report, a key catalyst for interest rate expectations. However, analysts warn that the release could face delays due to a partial federal government shutdown, increasing the risk of short-term volatility across currency and fixed-income markets.
The dollar’s recent rally gained momentum on Friday after President Donald Trump nominated Kevin Warsh to succeed Jerome Powell at the Federal Reserve. Markets view Warsh as a relatively hawkish candidate, perceived as supportive of rate cuts but favoring a more measured and disciplined approach compared to other potential nominees.
On the geopolitical front, Trump also announced a new trade agreement with India, which includes mutual tariff reductions in exchange for New Delhi halting purchases of Russian oil. The announcement was interpreted by investors as a positive signal for US trade positioning and energy diplomacy, further underpinning demand for the dollar.
Meanwhile, the greenback softened slightly against antipodean currencies ahead of an expected interest rate hike by the Reserve Bank of Australia, as investors positioned for higher yields in the region.
For global investors, the current environment reflects a combination of strong US macroeconomic fundamentals, evolving Federal Reserve leadership dynamics, and renewed trade negotiations—factors that continue to support the dollar in the short term while keeping markets highly sensitive to upcoming labor data and central bank signals.
