The U.S. dollar rebounded due to new tariff threats from Donald Trump, specifically targeting computer chips, pharmaceuticals, and steel. These tariffs aim to bolster domestic manufacturing, particularly in military-related industries. Concerns about China's advancements in AI have heightened the urgency of these measures. The impending 25% import tariffs on Mexico and Canada continue to create a risk-averse sentiment, supporting demand for the dollar. As the Federal Reserve meets to consider interest rates, the market is particularly attuned to future monetary policy implications, which could further shape the dollar's value and Treasury yields.
The tariffs aim to boost domestic manufacturing, especially in industries linked to military hardware, as part of broader efforts to strengthen U.S. industrial output.
Rising concerns over China's AI advancements, particularly through the startup DeepSeek, have added urgency to these protectionist efforts.
Traders are closely monitoring monetary policy decisions, which may shape market sentiment in the weeks ahead.
The Fed's interest rate decision is expected tomorrow, with focus on the 2025 outlook which could influence the U.S. dollar's strength.
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