US Dollar Index has volatile ride after 10% tariff sticks despite trade deal for UK

NEW YORK (May 8) The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades flat and dips back below 100.00 before the upcoming announcement by Donald Trump on a “major trade deal” between the United States (US) and, reportedly, the United Kingdom (UK). The euphoria is fading quick now after CNN reported that the 10% tariff for the UK would remain in place, despite President Trump having announced earlier that the trade deal is comprehensive between the two nations.

The Dollar sprinted higher late Wednesday, fueled by the Fed rate decision and comments from Fed Chairman Jerome Powell. The Fed kept its policy rate unchanged at the 4.25%-4.50% range, as expected, while Fed Chairman Powell kept his wait-and-see approach on rates as uncertainty is high and there are risks for a return of inflation. That means the Fed will not cut anytime soon, making the US Dollar stronger with the yield differential between the US and other countries remaining wider in favor of the Greenback as the high-yielder. 

Daily digest market movers: Speech awaited

• Several traders and analysts are expressing concerns about the trade deal between the UK and the US. Generally, a solid trade deal on several topics and sectors takes years to negotiate and be ratified by both involved parties’ first. The tail risk here is that this could only be a deal in principle or even a simple exchange of goods without any details or concrete action as of yet, Bloomberg reports. Meanwhile CNN reported as well that the 10% reciprocal tariffs slapped on the UK will remain in place, despite the trade deal.
• The Trump administration is looking into cancelling or ignoring former President Biden’s chip act, which limits US exports of chips from ASML, AMD and Nvidia. The news that the Trump administration is considering overturning the order is seeing a surge in the Nasdaq Futures pre-market. 
• President Trump lashed out again at Fed Chairman Powell saying that energy prices and food prices have never been this low and that the Fed is too late in cutting rates while tariff money is pouring into the US, calling Fed Chairman Powell a "fool", on his Truth Social Network.
• The US weekly Jobless Claims this week saw Initial Claims came in at 228,000, below the expected 230,000 against the previous 241,000. The Continuing Claims fell to 1.879 million, below the expected 1.89 million, from 1.916 million. 
• At 14:00 GMT, US President Trump will deliver a speech regarding the expected UK trade deal. At the time of writing, the speech has not started yet
• Equities are starting to turn a little from their peak performance after that CNN headline that UK tariffs will remain in place. European equities are up by 0.5%, US equities are showing a similar move and are up by less than 0.50% on the day.
• The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at 20.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 66.4%.
• The US 10-year yields trade around 4.31%, not really moving much after the Fed and trade deal announcements. 

FXStreet