US Dollar Index jumps to near 104.30 US political uncertainty dampens market sentiment

NEW YORK (July 19) The US Dollar (DXY), which tracks the Greenback’s value against six major currencies, extends its upside to near 104.30 in Friday’s European session after a sharp recovery from an almost four-month low of 103.65 this week. The US Dollar’s (USD) appeal improves amid deepening speculation that the United States (US) Republican Party will come into power in presidential elections scheduled later this year.

The assassination attempt on Donald Trump and expectations that US President Joe Biden could drop his re-election bid have increased the possibility of Republicans coming out victorious in elections.

Donald Trump is known for advocating tight trade policies, which lower the supply of the US Dollar in global markets and strengthen its appeal.

Meanwhile, the 10-year US Treasury yields have also recovered to near 4.21%. However, the broader outlook for the US Dollar and bond yields remains uncertain as investors see the prospects of the Federal Reserve (Fed) beginning to reduce interest rates in September as certain.

Cooling inflationary pressures and upside risks to US labor market strength have prompted Fed rate-cut bets. According to the CME FedWatch, 30-day Federal Funds Futures pricing data shows that traders have priced in a rate-cut move in September and a follow-up one in November or December.

In Friday’s session, Fed officials New York Fed Bank President John Williams and Atlanta Fed Bank President Raphael Bostic are lined up for speech. Investors will look for cues about whether two rate cut expectations are appropriate.

FXStreet