• The US Dollar Index finds support at the 98.00 area, but upside attempts remain limited.
• The escalating trade tensions between the US and China are gripping markets and weighing on the US Dollar.
• Dovish comments by Fed policymakers have endorsed hopes of two more rate cuts before year-end.

The US Dollar Index has found some support at the 98.00 area and is trimming some losses during Friday’s European trading session. The Index, however, remains vulnerable, after having depreciated nearly 1.30% in a four-day sell-off.

The USD Index, which measures the value of the USD against a basket of six majors, remains unable to put a significant distance from weekly lows, as concerns about the mounting tensions between the US and China and hopes of upcoming Fed rate cuts are acting as headwinds for any potential recovery

Trade wars, Fed easing hopes weigh on the USD

The trade rift with China escalated on Thursday after US President Donald Trump affirmed that they are already in a trade war with the Asian Country. Later on the day, Treasury Secretary Scott Bessent called China’s trade negotiator “unhinged” wolf, which did not help to de-escalate tensions.

Furthermore, the Fed keeps sending signals of further monetary easing ahead. On Thursday, Fed Governor Christopher Waller affirmed that the bank should cut rates again in October, the impact of tariffs on inflation remains moderate, while Stephen Miran, Trump’s latest appointment to the board, reiterated the need for more aggressive rate cuts.

The Fed is the primary source of data amid the US government shutdown, and later today, it will release September’s Industrial Production report, which is expected to have grown at a steady 0.1% pace. Later on, St. Louis Fed President Alberto Mussalen might provide further clues on the bank’s monetary policy plans.