Tariffs and Dollar Strength Continue to Influence Financial Markets
The risk remains that tariffs incrementally escalate over time, said Billy Leung, investment strategist at Global X ETFs. This could fuel persistent inflation pressures, keep the Federal Reserve cautious on rate cuts, and reinforce policy divergence factors that support a stronger dollar.
The dollar extended Friday's 0.3% advance after Trump signalled that he would announce reciprocal levies on trading partners, without specifying the details. The world's reserve currency has climbed around 7% from its September low, underscoring investors' concerns about the inflationary effect of tariffs and how that might influence the Fed's policy easing cycle.
Wall Street banks argue that the dollar's strength has room to run even as traders mull the outcome of Trump's on-again, off-again tariff threats. Goldman Sachs Group Inc. is expecting the dollar to break parity against the euro, while JPMorgan Chase & Co. predicts the greenback may buy around 1.50 Canadian dollars for the first time in a generation.
The Trump administration is clearly aiming to use tariffs as a negotiating tool and also as a strategic or restructuring avenue, said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney. We remain in a state of influx and the dollar is doing what it should amid heightened periods of uncertainty.
