US Dollar strengthens as markets brace for Inflation and Trade war risks

US Dollar strengthens as markets brace for Inflation and Trade war risks

The US dollar surged against other major currencies as markets opened for early Monday trading, driven primarily by traders betting on a future of higher inflation in the US. After a weekend dominated by the US decision to impose trade tariffs on key partners—and their subsequent retaliation—the stage appears set for an all-out trade war. Barring any unexpected U-turns, the US administration’s shift in trade policy is likely to drive inflation higher in the world’s largest economy, forcing the central bank to keep interest rates elevated for longer. This scenario naturally supports the US dollar against its peers. However, the picture is more nuanced. While rising protectionism fuels inflationary pressures, it also casts a shadow over economic growth forecasts. As a result, treasuries become more appealing, driving yields lower—a factor that could act as a headwind for the greenback.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

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