The US Dollar Index rose slightly to 98.85 during the Asian market session. This increase comes as President Trump reassures traders about the US-China trade situation. Initially, Trump threatened to impose 100% tariffs on China, but he has now taken a softer stance, suggesting a more cooperative relationship. The University of Michigan’s Consumer Sentiment Index dropped to 55.0 in October, down from 55.1 in September. This was better than the expected drop to 54.2. The one-year Consumer Inflation Expectation fell to 4.6%, while the five-year expectation remained unchanged at 3.7%.

Prospects For US Dollar Growth

The US Dollar’s growth may be limited due to the ongoing government shutdown affecting markets. Furthermore, there is a 97% chance of a 25 basis point rate cut by the Federal Reserve at its October meeting, with a 92% chance of another cut in December. The US Dollar is the official currency of the US and is widely traded around the world, making up 88% of foreign exchange transactions, amounting to $6.6 trillion daily. The Federal Reserve impacts the dollar’s value through monetary policy and quantitative easing, which can strengthen the dollar. Conversely, quantitative tightening involves stopping bond purchases and usually leads to a stronger dollar as well. Currently, the US Dollar Index is hesitating around the 105.50 mark after a strong performance in recent years. This follows the Fed’s aggressive rate hikes that started in 2022 to tackle rising inflation. Traders are now closely monitoring whether this period of dollar strength is coming to an end. Reflecting on the market mood from years past, particularly late 2019, concerns were focused on President Trump’s trade talks with China. Today, in October 2025, the main issues have shifted from tariffs to the ongoing tech and supply chain rivalry, but geopolitical tension still significantly affects the dollar. The market remains just as sensitive to these global pressures as it did back then.

Consumer Sentiment And Fed Policy

Consumer sentiment is a crucial factor, and the latest University of Michigan survey recorded a reading of 71.5. This marks a significant improvement from the all-time lows during the inflation peak in 2022 but remains much lower than pre-pandemic levels. This indicates that consumers are still cautious, which may affect future spending and Federal Reserve decisions. The Federal Reserve has maintained steady interest rates for several meetings, and the market is now searching for indicators of the first possible rate cut. According to the CME FedWatch tool, the derivatives market is pricing in about a 60% chance of a 25 basis point cut by the March 2026 meeting. This expectation for future easing is currently limiting the dollar’s potential for growth. Given this situation, it may be wise to consider strategies that take advantage of a stable or gradually declining dollar. Buying put options on dollar-tracking ETFs like UUP could be a simple way to prepare for a potential downturn as rate cut expectations become clearer. For those anticipating volatility around inflation data or Federal Reserve announcements, using options straddles on major currency pairs like EUR/USD can help traders profit from significant movements in either direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now