US Dollar Index Holds Above 99.00 as Traders Eye CPI and Easing Tariff Tensions

US Dollar Index Holds Above 99.00 as Traders Eye CPI and Easing Tariff Tensions

DXY Gains for Second Day Amid Lower Trade Tensions

The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, is trading higher near 99.10 during Wednesday’s Asian session. This marks the second consecutive day of gains, as the Greenback finds strength from easing US-China trade tensions and anticipation of the May US Consumer Price Index (CPI) data.

US-China Trade Developments Support USD Sentiment

US Commerce Secretary Howard Lutnick stated Tuesday that the US and China have reached a tentative framework to implement the Geneva Consensus, aimed at stabilizing bilateral trade relations. China's Vice Commerce Minister Li Chenggang also confirmed that discussions were reasonable and frank and that the framework would be reviewed by Chinese leadership.

The de-escalation of tariff tensions has boosted investor confidence, providing additional support to the USD across the board.

CPI Data in Focus

Market participants are closely watching for the US CPI report, due later Wednesday. Expectations are set for a 2.5% year-over-year increase in May, which will influence inflation outlooks and future Federal Reserve monetary policy actions.

US Treasury Yields Stable Ahead of Data

Yields on US Treasury bonds remained flat in the lead-up to the inflation release, reflecting cautious sentiment. At the time of writing:

• 2-Year Yield: 4.01%
• 10-Year Yield: 4.46%

These rates indicate a wait-and-see approach as investors assess how inflation and trade policy will shape economic growth and rate decisions.

Legal Support for Tariffs Adds to USD Strength

In a key legal development, the US Court of Appeals for the Federal Circuit extended a temporary stay, allowing the Trump-era tariffs to remain in place as appeals continue. The Justice Department argued that trade policy concerns outweigh claims of economic harm by small businesses.

This court decision reinforces the current tariff structure, which may influence inflation and trade-related capital flows, indirectly benefiting the US Dollar.

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