Trump's tariff threat hits market confidence, and the US dollar index falls back

Huitong Financial APP News-After U.S. President Trump's remarks on tariffs on Friday (October 10), U.S. Treasury yields fell sharply on Friday. The move injects new geopolitical risks into an already tight market.
The US dollar exchange rate weakened simultaneously with yields, andthe US dollar index fell back from its weekly high. Traders are weighing the dual impact of a reduced probability of interest rate cuts with rising political uncertainty overseas.
Trump's remarks hit market risk appetite and prompted investors to turn to bonds and gold; after a brief decline in the stock market, the entry of bottom-hunting funds pushed stock prices back. The yield on the 10-year Treasury note fell 8 basis points to 4.063%; the yield on the 2-year Treasury note fell 7 basis points to 3.522%.
The U.S. government is currently at a stalemate and the economic calendar is sparse. Affected by the government shutdown (currently in its 10th day), the market is still in a state of interruption in data release.
Expectations for interest rate cuts continue to be firm, and the US dollar index drops from high
Despite some opposition within the Fed, the comments of Fed officials strengthened the possibility of a rate cut, andthe US dollar index fell back from Thursday's two-month high to 99.33.Federal Reserve Governor Christopher Waller said on Friday that the Fed should remain "cautious" but also confirmed its support for easing policy.
Federal funds futures currently show a 95% probability of a 25 basis point rate cut in October; the probability of another rate cut in December falls back to 80%. Minutes of the Federal Open Market Committee (FOMC) meeting released earlier this week showed that members generally supported interest rate cuts, but had not yet reached a clear consensus on the pace of interest rate cuts-incomplete inflation data due to the government shutdown is one of the reasons for the unclear pace.
France and Japan intensify volatility in global foreign exchange marketsAffected by intensified political turmoil in France, theeuro against the US dollaris hovering near a two-month low of 1.15705, with a decline of 1.5% this week. French President Macron has struggled to find a new prime minister who can push through the austerity budget bill, undermining market confidence in the euro zone's second-largest economy.
At the same time, although the yen exchange rate rebounded slightly to 152.7 yen to the US dollar, it still faces pressure. The yen is expected to fall 3.5% this week, the largest weekly decline in a year, as market expectations for the Bank of Japan to raise interest rates cooled after Takashi Haraichi's political victory. Japanese Finance Minister Kato acknowledged growing concerns about the foreign exchange market, but did not propose specific measures to respond.
Market Outlook: Risks continue to accumulate, and the US dollar is blocked from breaking through the 100 mark
(4-hour chart of the US dollar index Source: Yihuitong)The current weakening of US Treasury bond yields, the re-emergence of geopolitical risks, and further pressure from overseas political uncertainty. Under the combination of multiple factors,itmay be difficult for the US dollar index (DXY) to successfully break through the 100 mark. The resistance level at this level has not yet been exceeded, and the short-term upside of the dollar is limited in the absence of new economic data or the Federal Reserve's turning hawkish. Traders should pay attention to upcoming corporate earnings reports and remarks by Fed officials for guidance.