US Dollar Index Steadies Above 99.00 as Trade Optimism Lifts Sentiment Ahead of Powell Speech

Market Overview

The US Dollar Index (DXY) is holding near 99.25 in Tuesday’s North American trading hours, stabilizing after recent volatility. Investors are finding some reassurance in signs of a softer stance from Washington on trade policy toward China, while also keeping a close eye on the Federal Reserve for fresh guidance on interest rates.

Fed Signals and Policy Outlook

Although optimism around US-China trade relations has underpinned the dollar, dovish commentary from Federal Reserve officials continues to temper gains. Philadelphia Fed’s Anna Paulson suggested Monday that additional rate cuts may be required to support the labor market, highlighting that tariffs appear less inflationary than feared.

Markets are now pricing in a high probability of a 25-basis-point cut at the Fed’s October policy meeting, with another move expected before year-end. Chair Jerome Powell’s remarks later today will be closely scrutinized for any signals on the central bank’s policy trajectory, especially as investors weigh the balance between easing trade tensions and domestic growth risks.

US-China Trade Tensions Ease

Trade developments remain a pivotal driver for the greenback. Last week, President Trump rattled markets with threats of 100% tariffs on Chinese goods starting November 1. However, his softer comments over the weekend—suggesting that “it will all be fine”—have helped calm nerves. Treasury Secretary Scott Bessent added that Trump still plans to meet Chinese President Xi Jinping in South Korea later this month, raising hopes for renewed dialogue.

This more conciliatory tone has helped the DXY consolidate gains, though lingering uncertainty keeps traders cautious.

Government Shutdown Weighs on Sentiment

Beyond trade and Fed policy, the US government shutdown—now stretching into its third week—remains a drag on sentiment. Prolonged political gridlock raises the risk of slower economic growth, which could in turn pressure the dollar lower if fiscal uncertainty deepens.

Technical Outlook

From a technical perspective, the DXY continues to find support above 99.00, with near-term resistance at 99.50. A sustained break above that level could open the door toward 100.00, though dovish Fed expectations may limit momentum. On the downside, a move below 98.80 would suggest renewed bearish pressure.

What Traders Are Watching

• Powell’s speech later today for clues on Fed policy direction
• Progress on US-China trade talks and any confirmation of the Trump–Xi meeting
• Ongoing government shutdown and its potential impact on Q4 growth
• Key support at 99.00 and resistance at 99.50 on the DXY

Summary

The US Dollar Index remains steady above 99.00 as easing trade tensions with China provide support, but dovish Fed signals and political uncertainty in Washington cap upside momentum. Traders now look to Powell’s remarks for clarity on the Fed’s next steps, while monitoring trade headlines and fiscal developments for the dollar’s near-term direction.