USD Index registered fresh yearly highs at 97.20 on Tuesday but failed to sustain the bullish momentum and corrected lower quite aggressively. A mild selling pressure remains today though the bulls are still in the game for now. After the initial spike, European currencies pared intraday gains and switched to a consolidation mode.
Traders decided to take profit at attractive levels on the back of rising optimism over trade talks across the markets. Trump said he might consider pushing back a March 1 deadline for trade negotiations with China if both sides are close to making a deal. This message sparked another wave of euphoria across the stock markets and suppressed demand for safe haven currency.
In a wider picture, the greenback prospects will depend not only on the general market sentiment but on the incoming US economic data as well. Signs of a relatively steady growth, especially in contrast with signals from Europe, will help the dollar to retain the advantage over its rivals, despite the Fed signalled a pause in hiking rates.