US Dollar Slips as Trade Policy Doubts and China’s Denial Stir Market Uncertainty

The US Dollar Index (DXY) edged lower to around 99.33 on Monday, reflecting growing skepticism about the trajectory of US trade policies under the Trump administration. As markets opened a pivotal week, the US Dollar faced headwinds fueled by China’s outright denial of ongoing trade negotiations, contradicting US claims of “daily conversations” with Beijing. This disconnect, coupled with fading hopes for tariff reductions, has cast a shadow over global economic stability, leaving the Dollar on shaky ground with bearish technical indicators signaling resistance at 99.43, 99.53, and 99.80.

Beijing’s insistence that no trade talks are underway and its warning that tariff wars yield no winners have deepened market unease. Analysts at Standard Chartered underscore the broader implications, noting that the Trump administration’s approach continues to erode multilateralism. With the World Trade Organization (WTO) increasingly sidelined and free trade agreements mired in protracted negotiations, the prospect of lower global tariffs appears increasingly elusive. This prolonged uncertainty threatens to dampen global growth, adding further pressure on the US Dollar as investors reassess its safe-haven appeal.

The real-world impact of escalating tariffs is already evident, with Chinese e-retail giants Temu and Shein hiking prices by up to 300% for US consumers, a direct consequence of heightened trade barriers. Meanwhile, markets remain on edge as they await critical US economic data, including the first-quarter GDP report and April’s Nonfarm Payrolls (NFP) figures.

These releases will be closely scrutinized for clues about the Federal Reserve’s next moves, particularly whether a rate cut could materialize at the May 7 meeting. For now, the US Dollar’s softening reflects a market grappling with trade policy missteps and an uncertain economic outlook, setting the stage for a volatile week ahead.