US Dollar Index holds near yearly lows pressured by lower yields

February 26, 2025

LONDON (February 26) The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, edges slightly higher and trades around 106.50 at the time of writing on Wednesday after not breaking any pots or making any positive impressions in February. The DXY Index holds near yearly lows as traders shun the Greenback in a flight to safe havens from United States (US) President Donald Trump’s tariffs, which are set to kick in on March 4 for Mexico, Canada, and China. 

Meanwhile, traders are seeing a second element of a weaker greenback. For the first time this year, Federal Reserve (Fed) rate cut bets are pricing in two rate cuts for 2025. The move comes as the interest rate gap between US yields and other countries narrowed, triggering a weaker US Dollar overall. It comes just days before the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) data, which will be released on Friday. 

Daily digest market movers: Trump ahead

  • At 14:00 GMT, US President Donald Trump will be speaking with the media.
  • At 15:00 GMT, New Home Sales are expected to slow down to 0.68 million units for January compared to the 0.698 million units a month earlier. 
  • At 17:00 GMT, President of the Federal Reserve Bank of Atlanta Raphael Bostic participates in a moderated discussion at the Urban Land Institute in Atlanta.
  • At 18:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin delivers a speech, "Inflation Then and Now", at the Northern Virginia Chamber of Commerce, Arlington.
  • Equities are brushing off the negative tone from Tuesday and are up across the board on Wednesday. 
  • The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June, backed by the drop in US yields this Wednesday. Currently, the tool projects a 66.2% chance of interest rates being lower than current levels compared to 33.8% for no rate cut
  • The US 10-year yield trades around 4.30%, further down from last week’s high at 4.574%.

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