US Dollar: US-China Trade Uncertainty and Revenge Tax Weigh on the Greenback – ForexNews.PRO
The US dollar is facing headwinds due to escalating trade tensions between the US and China and the potential implementation of a “revenge tax” targeting foreign investors. Weaker-than-expected jobs data released this week could further pressure the dollar. Meanwhile, the Eurozone and Canada are anticipated to implement interest rate reductions.
Re-emerging US-China trade friction is causing a softening in global equity markets and the dollar. Although the trade agreement reached in Geneva last month remains technically intact, both nations appear to be growing increasingly discontented. Concerns are fueled by social media posts from the US President and statements in Chinese state media expressing dissatisfaction with the fulfillment of trade commitments.
A premature termination of the trade deal could negatively impact risk assets and the dollar. Additionally, the US government’s decision to double tariffs on steel and aluminum imports has intensified trade tensions. The possibility of imposing sectoral tariffs ranging from 25% to 50% on sectors such as pharmaceuticals, semiconductors, and aerospace is also being considered.
The potential enactment of Section 899, which involves levying retaliatory taxes of up to 20% on residents of countries employing “discriminatory” taxes, may be contributing to the dollar’s weakness. This measure could impact countries that have implemented digital service taxes, and if these taxes are not removed, a new withholding tax on gross income could be applied starting next year.
This week’s economic calendar includes key jobs data releases and business surveys. Furthermore, multiple Federal Reserve officials are scheduled to speak, and the Fed’s Beige Book will be released. Despite the speculative market’s existing short dollar positions, the overall bearish sentiment suggests that the DXY index could decline toward the 98.70 level.
Despite the likelihood of an ECB rate cut and expected soft eurozone inflation data, dollar weakness is supporting the EUR/USD exchange rate.
Sterling is maintaining relative strength, especially against the dollar. Upcoming speeches from Bank of England policymakers and recent positive housing price data are providing support for the UK economy.
