The U.S. Dollar Index (DXY) is experiencing heightened volatility due to ongoing trade policy uncertainty, according to a recent report from BofA Global Research. The report highlights that tariffs have been used as a negotiating tool, leading to elevated trade policy uncertainty, which is expected to persist until a new USMCA is settled. "Trade policy uncertainty is very high and is likely to remain so in the near term," BofA analysts note. The report suggests that while the USD shows strength now, it is expected to soften in the second half of 2025. The analysts advise caution, emphasizing that the U.S. economic policy threats must be taken seriously and literally. They also highlight that U.S. equities could see earnings fall as much as 8% under bilateral tariffs, assuming no price pass-through. As the market navigates these uncertainties, BofA recommends adding duration on any rate rise that fully prices out cuts or adds risk of hikes, and suggests picking stocks over owning the S&P 500.