US dollar strengthens amid tariff speculations and Fed signals
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The US Dollar continued its upward trajectory for the second consecutive day on Wednesday, supported by cautious market sentiment and robust employment data. Speculation around President-elect Donald Trump’s potential tariff measures added to the dollar’s strength, while investors braced for speeches from Federal Reserve officials and Friday’s job report.
The dollar’s dominance this week
The US Dollar outperformed its peers, particularly against the British Pound, reflecting its resilience amid uncertain economic conditions.
Key movements in major currency pairs
EUR/USD
The euro extended losses against the dollar, trading near 1.0300. German Industrial Production data provided a brief reprieve with a better-than-expected increase of 1.5% in November, but it wasn’t enough to reverse the downward trend.
GBP/USD
The pound faced sharp declines, losing nearly 1% on Wednesday to trade below 1.2300, its lowest level in over a year. Persistent dollar strength and bearish sentiment weighed on the pair.
USD/JPY
The dollar posted modest gains against the yen for the third consecutive day, holding above 158.00. However, the pair showed signs of consolidation on Thursday.
Market drivers
Trump’s tariff speculations
Reports suggest that President-elect Donald Trump is considering declaring a national economic emergency to introduce a new tariff program. This news bolstered the dollar as markets adopted a cautious stance.
Fed’s December minutes
The minutes highlighted concerns over rising inflation risks, with officials agreeing on the need for careful policy easing. This hawkish tone provided additional support for the dollar.
Mixed US employment data
Private sector employment rose by 122,000 in December, falling short of the expected 140,000. However, weekly initial jobless claims dropped to 201,000, signaling a resilient labor market.
Global economic indicators
China
Inflation in China slowed further, with the Consumer Price Index (CPI) rising only 0.1% annually in December, down from 0.2% in November
Australia
Retail sales in Australia rose 0.8% in November, reflecting steady consumer spending. However, AUD/USD struggled, trading near 0.6200, down 0.3%.
Gold and commodities
Gold extended its recovery, touching a multi-week high of $2,670 on Wednesday, but remained range-bound above $2,660 early Thursday.
Outlook
The US Dollar is likely to remain supported in the short term as markets focus on upcoming Federal Reserve commentary and Friday’s non-farm payrolls report. Investors will look for further clues on the Fed’s monetary policy path and the potential implications of Trump’s tariff policies.
Conclusion
The dollar’s strength this week reflects its position as a safe-haven currency amid economic uncertainty and hawkish Fed signals. However, with mixed data and geopolitical developments on the horizon, the markets are poised for potential volatility.
The dollar’s dominance this week
The US Dollar outperformed its peers, particularly against the British Pound, reflecting its resilience amid uncertain economic conditions.
Key movements in major currency pairs
EUR/USD
The euro extended losses against the dollar, trading near 1.0300. German Industrial Production data provided a brief reprieve with a better-than-expected increase of 1.5% in November, but it wasn’t enough to reverse the downward trend.
GBP/USD
The pound faced sharp declines, losing nearly 1% on Wednesday to trade below 1.2300, its lowest level in over a year. Persistent dollar strength and bearish sentiment weighed on the pair.
USD/JPY
The dollar posted modest gains against the yen for the third consecutive day, holding above 158.00. However, the pair showed signs of consolidation on Thursday.
Market drivers
Trump’s tariff speculations
Reports suggest that President-elect Donald Trump is considering declaring a national economic emergency to introduce a new tariff program. This news bolstered the dollar as markets adopted a cautious stance.
Fed’s December minutes
The minutes highlighted concerns over rising inflation risks, with officials agreeing on the need for careful policy easing. This hawkish tone provided additional support for the dollar.
Mixed US employment data
Private sector employment rose by 122,000 in December, falling short of the expected 140,000. However, weekly initial jobless claims dropped to 201,000, signaling a resilient labor market.
Global economic indicators
China
Inflation in China slowed further, with the Consumer Price Index (CPI) rising only 0.1% annually in December, down from 0.2% in November
Australia
Retail sales in Australia rose 0.8% in November, reflecting steady consumer spending. However, AUD/USD struggled, trading near 0.6200, down 0.3%.
Gold and commodities
Gold extended its recovery, touching a multi-week high of $2,670 on Wednesday, but remained range-bound above $2,660 early Thursday.
Outlook
The US Dollar is likely to remain supported in the short term as markets focus on upcoming Federal Reserve commentary and Friday’s non-farm payrolls report. Investors will look for further clues on the Fed’s monetary policy path and the potential implications of Trump’s tariff policies.
Conclusion
The dollar’s strength this week reflects its position as a safe-haven currency amid economic uncertainty and hawkish Fed signals. However, with mixed data and geopolitical developments on the horizon, the markets are poised for potential volatility.