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>>Dollar Soars as Trump’s Tariff Surprise and a Hawkish Fed Redefine Global FX Markets

Dollar Soars as Trump’s Tariff Surprise and a Hawkish Fed Redefine Global FX Markets

crypthub

about 2 hours ago

Dollar Surge & Market Reaction

The Dollar Index jumped 1.8% to a three‑month high, pushing the euro to 1.0650 and the pound to 1.2450. The yen rose toward intervention levels at 152.50, while the peso and yuan weakened sharply. Traders cite Trump’s surprise tariff plan and the Fed’s hawkish tone as the dual drivers of the move. Analysts expect the dollar to stay strong through early 2025.

Tariff Announcement Details

Trump proposed a 10% baseline tariff on all imports, a 60% levy on Chinese electronics and auto parts, and higher duties on German cars and French farm goods. Revised NAFTA rules will affect Canadian and Mexican trade. Economists warn these measures could lift domestic prices, prompting tighter monetary policy. The tariff shock amplified the dollar’s rise beyond typical volatility.

Federal Reserve Policy Shift

Fed Chair Jerome Powell labeled inflation “unacceptably high” and signaled that rates may remain elevated or rise further. The central bank’s revised outlook cuts expected 2025 rate cuts to one or two and raises the terminal rate to 4.8‑5.0%. Higher U.S. rates attract foreign capital, reinforcing dollar demand. Combined with tariffs, this creates a “perfect storm” for sustained dollar strength.

Broader Market Implications

Emerging‑market currencies face higher debt‑service costs and import‑price pressure, while commodity prices such as gold and oil slipped 1‑2% on the dollar’s rise. Major central banks wrestle with inflation versus growth, limiting coordinated responses. Technical charts show the Dollar Index breaking its 200‑day moving average, suggesting further upside. Traders are advised to watch inflation data, central‑bank minutes, and key support‑resistance levels.