I believe that the shocks currently occurring in the financial markets are merely a strategic setback in the larger recovery journey of the US economy. And if everything goes as predicted, the USDX could very well return to the old peak above 110.1 (previously reached on January 13, 2025, according to data from #FXCE ) this year.
Currently, market sentiment is being influenced by short-term shocks from President Trump's new 25% tariff, causing a temporary halt in Stellantis factories in Canada and Mexico. Layoffs are increasing sharply, personal spending is declining, and bond yields are plummeting – all creating a seemingly negative economic picture. But beneath that fog, a clear strategy for domestic economic recovery is taking shape.
President Trump did not randomly choose to 'hurt' the market at this time. The imposition of large-scale tariffs is a lever forcing the Fed to lower interest rates in the second half of 2025. As interest rates decrease, borrowing costs will also fall, creating conditions for US businesses to expand investment and redistribute production domestically – a goal that has long been part of the 'America First' agenda.
Why do I believe the USDX will rise again?
Global capital will return to the US: As other economies are also affected by tariffs, the US, with its domestic production advantage and large consumer market, will become an attractive destination for investment flows.
The Fed will ease at the right moment: Not too early, but just enough to stimulate demand before a real recession occurs. This will create a perfect 'soft landing' for the USD.
The US remains a safe haven: In the context of global instability, the USD is always where investors turn. When confidence returns, the greenback will continue to assert its dominant position.
Even if the stock market has yet to find a balance, #USDX is taking a step back, from the 103.3 range to 101.3 after the tariff information (data from FXCE), it is still a consolidation zone before a major growth surge.
We have seen the USDX break 110 at the beginning of this year — and it would not be surprising if the USD breaks that mark again by the end of 2025, as the domestic economy recovers, production ramps up, and interest rates are gradually adjusted more flexibly.
In summary: The current difficulties are necessary for the US to create a stronger, more independent economic structure. And on this journey, the USD – as the 'lifeblood' of the global economy – will undoubtedly return stronger than ever. For long-term traders like me, this is the time to observe, accumulate, and prepare for the next growth phase.