FX.co ★ US Dollar Index Holds Bounce

The US Dollar Index climbed to 100.8, rebounding from a one-month low of 100.5 reached on July 16, and diverging from the pullback in Treasury yields as investors shifted toward safer assets. Trade tensions with China re-emerged after President Trump accused Beijing of interfering in the 2020 US presidential election. The allegation threatened the fragile easing of economic frictions since last year’s mutual tariff reductions and exacerbated existing shipping bottlenecks linked to the conflict in the Middle East. Parallel trade frictions between the EU and China also weighed on demand for the euro.

On the monetary policy front, FOMC officials continued to indicate that persistently elevated core inflation may justify another interest rate increase this year, a stance supported by robust retail sales data and low levels of unemployment claims. These hawkish signals persisted despite soft June inflation figures and a second consecutive decline in inflation expectations, as reported by the University of Michigan consumer sentiment survey.