Trump's imposition of steel and aluminum tariffs drives up the US dollar, and market focus shifts to Federal Reserve policies

Trump announced on Tuesday that he will impose a 25% tariff on all steel and aluminum imports. This decision has attracted widespread attention in the global market and has had a direct impact on the US dollar. Despite intensifying global economic and trade concerns, the US dollar continues to rise, demonstrating market confidence in the US economy and monetary policy.

The US dollar rises: Continuing the upward trend, market sentiment is cautious

The US dollar rose 0.13% after Trump announced steel and aluminum tariffs, and the US dollar rose to around 1.4337 against the Canadian dollar. The rise of the US dollar reflects the market's optimistic view on the performance of the US economy. At the same time, the euro and pound fell slightly. The Japanese yen rose slightly due to safe haven demand and closed at around 151.90 against the US dollar.

Matt Simpson, Senior Market Analyst at City Index, stated:

The rise of the US dollar seems to have come to a halt, and the market may currently face more volatile trading. Investors still remain highly concerned about the policy movements of the Federal Reserve, especially Powell's testimony and the upcoming release of US CPI data, which may further support the rise of the US dollar

Global Economic and Trade Concerns: Short term Strong US Dollar, but Uncertainty Remains

Although Trump's tariff policies have supported the rise of the US dollar, they have also exacerbated the uncertainty of global economic growth. Especially the supply of steel and aluminum from countries such as Canada, Brazil, Mexico, South Korea, and Vietnam has been directly affected. The steel and aluminum exports of these countries occupy an important share of the US market, and these changes in trade policies may affect the global trade environment, thereby impacting energy demand and global economic growth.

According to ANZ's analyst perspective:

The Federal Reserve's patience in the current economic environment, especially against the backdrop of rising trade concerns, may affect future monetary policy. Despite the relatively robust US economy, global uncertainty remains high and the strength of the US dollar may be difficult to sustain

Federal Reserve policy expectation: Market awaits Powell's testimony and CPI data

The Federal Reserve has taken a relatively cautious stance on future monetary policy. Despite recent statements from Federal Reserve officials indicating their patience with interest rate cuts, the market remains highly concerned about Powell's testimony and the upcoming release of US inflation data. According to market research, the Federal Reserve futures market expects a rate cut of no more than 40 basis points within the year.

ANZ analysts further pointed out that:

The Federal Reserve believes that the current strong economic growth in the United States, inflation levels above target, and policy interest rates close to neutrality make it less urgent for the Fed to cut interest rates. This policy patience may support the medium-term strength of the US dollar

The Australian dollar is performing weakly, and the market is paying attention to the reactions of other currencies

Against the backdrop of a strengthening US dollar, the Australian dollar experienced a slight decline. The Australian dollar fell slightly against the US dollar, closing around 0.6263. At the same time, Australian Prime Minister Anthony Albanese stated that Trump agreed to consider exempting Australia from steel and aluminum tariffs during the call, which partially eased some market concerns.

FXCUE Editor's Perspective:FXUCE Editor's Perspective:

Trump's tariff policy has played a role in fueling the short-term rise of the US dollar, but the increasing uncertainty of the global economy and trade concerns still bring significant volatility to the market. The monetary policy of the Federal Reserve, changes in the global trade situation, and the performance of US economic data will be important determining factors for the future trend of the US dollar. Although the US dollar is currently showing strength, the volatility and uncertainty of market sentiment may make it difficult to sustain its rise. Investors should remain cautious and pay attention to the latest statements from the Federal Reserve and economic data.