As President-elect Donald Trump gears up to take office, there’s anticipation around a host of executive actions he might introduce, aimed at stimulating economic growth through fiscal measures, tariffs, and various stimulus initiatives. Encouragingly, the U.S. housing market remains strong, with increased permits and construction starts highlighting a stable economic outlook as we head into the new year. Meanwhile, market participants are keenly analyzing hints from Federal Reserve officials.
On Friday, the U.S. Dollar showed some stability, with the Dollar Index (DXY) hovering around the 109.00 mark, as traders look for clear direction. Comments from Fed Governor Christopher Waller indicating that a rate cut in March could still be on the table, along with other economic data, have left the market speculating in the lead-up to Trump’s inauguration.
In the daily market update, the spotlight is on a recovering USD ahead of the inauguration and signals from the Fed. Governor Christopher Waller struck a more dovish note by pointing out positive inflation trends which might justify a rate cut soon, suggesting March could be a possible timeframe if there is further evidence of moderated prices.
The nominee for Treasury Secretary, Scott Bessent, stressed the importance of maintaining the U.S. Dollar’s position as the world’s reserve currency and supporting an independent Fed. He also noted that any increase in consumer prices from tariffs might be somewhat mitigated by changes in exchange rates.
On the economic data front, building permits and housing starts surpassed expectations, and industrial production showed a notable recovery, signaling ongoing momentum in the U.S. economy. Stock markets seem cheery, with U.S. equities up more than 1% in day trading, seemingly buoyed by the new administration’s assertive policy plans.
According to the CME FedWatch Tool, there is a high probability—around 97%—that rates will remain the same at the upcoming policy meeting, as the central bank waits to interpret new economic data and shifting political landscapes.
As for the technical outlook of the DXY, the U.S. Dollar Index rebounded after a period of profit-taking, climbing above 109.20. Despite occasional selling pressure, it remains near multi-year highs thanks to supportive fundamental factors backing the Dollar’s upward trajectory. The 20-day Simple Moving Average has proven a dependable support point, consistently fending off sellers.
Though a short-term decline could occur if upcoming data or policy updates disappoint, the current technical setup suggests that buyers are likely to step in rapidly to maintain the Dollar’s momentum.
