US Dollar Index (DXY) remains depressed below 99.00 on trade fears

• The US Dollar's recovery remains frail; the USD Index bulls are failing to extend gains beyond 98.70.
• Mounting tensions between US and China and aFed easing hopes keep weighing on the USD.
• Later today, a string of Fed policymakers will provide further clues about the bank's near-term rate path.
  

The US Dollar found some support at the 98.40 area earlier on Thursday, but the frail recovery attempt has remained limited well below the 99.00 area. The Index languishes at 98.60, near 10-day lows, as market concerns about the Sino-US trade rift are acting as headwinds for the US Dollar's recovery.
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The USD Index, which measures the value of the USD against a basket of six major currencies, has depreciated nearly 1% from Tuesday's highs, as both countries announced higher tariffs on each other's cargo vessels. This was the tipping point of a verbal escalation following China's decision to restrict rare earths exports.

The situation deteriorated further on Wednesday as US President Trump affirmed that there is already a trade war wi¡ith China and Treasury Secretary criticised the visit and the behaviour of China's trade negotiator.

The economic docket remains thin amid the US Government shutdown, but the Fed's Beige Book reported a resilient economy with slightly lower consumer spending and a stalled labour market, as businesses face higher import costs.

These conclusions endorse market expectations of further Fed monetary easing over the next months and add pressure on the US Dollar. Later on the day, a string od Fed policymakers are expected to provide further clues about the Fed's near-term monetary policy decisions.

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