US Dollar Index (DXY) pulls back below 97.00 amid tariff uncertainty

• The Dollar trims previous gains in a risk-averse market with tariff uncertainty growing.
• Trump is expected to sign a sweeping tax bill that might increase doubts about the sustainability of US debt.
• FX trade volumes are subdued on Friday as US markets are closed on Friday.

The US Dollar Index (DXY), which measures the value of the Dollar against the world's six most traded currencies, is retreating from Thursday's highs at 97.40, and back to levels below the 97.00 level, as the euphoria from the strong payrolls report turned into caution as the tariffs deadline approaches.

With July 9 around the corner and only three trade deals signed with China, the UK, and Vietnam, Trump announced on Thursday that he will send letters to all trading partners informing them about the tariffs that will be applied to their products.
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The prospects of higher levies to a long list of countries have renewed concerns of higher inflation and lower economic growth, which has been undermining the US Dollar since the April 2 "Liberation Day".
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Beyond that, Trump's Tax Bill, which is expected to increase the US debt load by $3.3 trillion in the next ten years, has passed Congress and will be signed by the President, probably today. This legislation is likely to fuel concerns about the sustainability of the US Government debt and act as a headwind for the US Dollar's recovery.

Currency markets, however, are at half throttle on Friday with the US market closed on the Independence Day bank holiday. This is limiting trading volumes and leading to range-bound trading among most US Dollar crosses. In this context, DXY downside attempts are likely to remain limited.