US Dollar Strengthens Amid Trump’s Tariff Plans and Fed Policy Meeting Minutes
The US Dollar (USD) continued its upward trend for the second consecutive day on Wednesday, driven by President-elect Donald Trump’s potential declaration of a national economic emergency to implement a new tariff program. This news, combined with the release of the Federal Reserve’s (Fed) December policy meeting minutes, led to a cautious market stance and a stronger USD.
US Dollar Index and Currency Pairs
The USD Index closed in positive territory for the second day, trading marginally higher at 109.10. EUR/USD declined, struggling to find a foothold near 1.0300, while GBP/USD lost nearly 1% and traded at its lowest level in over a year below 1.2300. USD/JPY posted small gains but failed to gather further momentum, retreating slightly on Thursday.
Economic Data and Market Reactions
The US private sector employment increased by 122,000 in December, missing market expectations. However, weekly Initial Jobless Claims declined to 201,000, and the Fed’s policy meeting minutes revealed that officials agreed on the need for a careful approach to further policy easing. Germany’s Industrial Production expanded by 1.5% in November, surpassing market expectations.
Gold and Other Markets
Gold extended its recovery, touching a multi-week high of $2,670 on Wednesday, and traded relatively quiet above $2,660 on Thursday. The Australian Bureau of Statistics reported a 0.8% monthly increase in Retail Sales in November, but AUD/USD showed no immediate reaction, losing 0.3% on the day near 0.6200.
Understanding the Federal Reserve’s Monetary Policy
The Federal Reserve’s primary tool for achieving price stability and full employment is adjusting interest rates. When inflation rises above the 2% target, the Fed raises interest rates, strengthening the USD. Conversely, when inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, weighing on the USD.
Conclusion
The US Dollar strengthened on Wednesday amid President-elect Trump’s potential tariff plans and the release of the Fed’s policy meeting minutes. The USD Index and various currency pairs reacted to economic data and market news, while gold extended its recovery. As markets await comments from Fed officials ahead of Friday’s job report, investors will closely monitor the Fed’s monetary policy decisions and their impact on the USD.
Source: Bitcoinethereumnews.com
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