US Dollar Index (DXY) struggles to regain 99.00 on choppy trading

• The Dollar bounced at 98.80, but is struggling to consolidate above 99.00.
• Fears of a Sino-US trade war are keeping US Dollar rallies limited.
• Political uncertainty in France and Japan keep underminging the safe-haven USD.

The US Dollar found support at the 98.80 area after retreating from the mid-range of the 99.00s on Friday, following Trump's threat to impose 100% tariffs on China. The Index pared losses on Monday but is struggling to consolidate above the 99.00 level with most currencies trading in a choppy and volatile manner:
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US President Donald Trump spooked investors on Friday, announcing 100% levies on Chinese exports in retaliation for the restrictions on the rare earth trade, and tried to cool things off on Sunday with a softer post on social media playing down that possibility.

Fears of a trade war are limiting US Dollar's rallies

Investors, however, remain wary. Chinese authorities defended the curb on rare metal export to Western countries and affirmed that they will introduce countermeasures if Trump's tariffs are finally applied.

Meanwhile, the US Federal government shutdown enters its third week with no solution in sight. Investors are practically fully pricing a quarter-point rate cut in late October and a high chance of another one in December. On Thursday, Federal Reserve Chairman Jerome Powell will take the stage and might give further insights on that matter.

Across the pond, France's president Macron's latest attempt to create a government does show little difference from the one that lasted only 14 hours last week. In Japan, the Komeito Party confirmed its exit from the ruling coalition, leading the country into a deeper political crisis. These developments are fuelling risk aversion and keeping the US Dollar from falling further.