Dollar Dominance: Economic Power Moves Amid Tariff Fears

The dollar remains strong as traders reconsider U.S. rate cuts after solid economic data. Investor concerns about Britain's fiscal status pressure sterling, while looming tariffs under President-elect Trump impact global currencies. Treasury yields rise, while inflation reports and Fed projections also influence currency markets.

The U.S. dollar continues to hold its ground near a two-year high, driven by robust economic figures that have forced traders to adjust their outlook on U.S. rate cuts planned for 2025.

Investor fears concerning Britain's fiscal health have kept the sterling under pressure, especially in light of incoming President-elect Donald Trump's policies aimed at economic growth, albeit with potential inflationary effects. The anticipated tariffs and the Federal Reserve's cautious stance on rate cuts have led to increased Treasury yields and a stronger dollar, suppressing the euro, pound, yen, and yuan.

TD Securities' Prashant Newnaha points out market shifts towards possible hikes in U.S. tariffs. Continuing news about Trump's gradual approach to tariffs may see U.S. Treasury yields and the dollar decrease, while U.S. equities could rise. With treasury yields hitting a 14-month high and a strong dollar impacting global financial flows, traders and strategists anticipate a challenging fiscal landscape ahead.

(With inputs from agencies.)