The US Dollar Index rises to approximately 104.30 as political uncertainty in the US dampens market sentiment

• The US Dollar strengthens as market participants anticipate a Donald Trump victory in this year’s Presidential elections.
• Investors expect the Fed to cut interest rates twice this year.
• Fed officials Williams and Bostic are scheduled to speak on Friday.

The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, rises to around 104.30 during Friday’s European session, following a sharp recovery from a nearly four-month low of 103.65 earlier this week. The USD’s appeal improves amid growing speculation that the Republican Party will win the upcoming presidential elections.

The assassination attempt on Donald Trump and the possibility that President Joe Biden might withdraw from his re-election bid have heightened expectations of a Republican victory.

Donald Trump is known for supporting restrictive trade policies, which reduce the global supply of the US Dollar and enhance its appeal.

The 10-year US Treasury yields have climbed back to approximately 4.21%. However, the broader outlook for the US Dollar and bond yields remains uncertain, as investors anticipate potential Federal Reserve interest rate cuts starting in September.

Cooling inflation and potential strength in the US labor market have fueled these expectations. According to CME FedWatch, traders have priced in a rate cut for September, with another likely in November or December. On Friday, speeches by New York Fed President John Williams and Atlanta Fed President Raphael Bostic are expected to provide further insights into the rate cut expectations.