Between October 2024 and April 2025, the U.S. Dollar Index (DXY) experienced significant fluctuations, reflecting broader economic and geopolitical dynamics. From October 2024 to January 2025, the DXY surged from 100.43 to 109.95, driven by the Fed’s cautious stance on rate cuts amid strong inflation and job data, alongside renewed trade tensions under President Trump. Administration. Widening interest rate differentials and geopolitical risks boosted the dollar's safe-haven appeal.

However, from mid-January to April 2025, the DXY fell 10.6% as escalating trade wars and a slowing U.S. economy eroded investor confidence. Fears of stagflation has kept the Fed on the sideliners. The DXY lost shine as traders expect the US economy to slip into recession.

DXY has recovered some ground this week on hints that US and China may reach a trade deal soon. The U.S. has lowered tariffs on most Chinese imports from 145% to 30%, while China has reduced its duties on U.S. products from 125% to 10%. This temporary agreement aims to ease trade tensions and has helped alleviate recession concerns in the U.S., thereby supporting confidence in the dollar.

Knowing the vagaries of Trump’s mood, the markets will see wide moves in both equities, bonds and forex.