Forex overview. US Dollar Gains Momentum Amid Tariff Optimism and Fed Signals – ForexNews.PRO
Scott Bessent and President Trump have generated two consecutive days of favorable news for US assets and the US dollar, highlighting de-escalations with China, a less aggressive Federal Reserve stance, and a reaffirmation of the ‘strong dollar policy.’ Our models suggest that the dollar has more potential for growth, but it hinges on Trump providing additional positive updates.
**USD: Is Bessent Concerned About a Dollar Recovery?**
The US dollar’s recovery is gaining momentum due to a broader easing of US protectionism and a commitment to Fed independence from the Trump administration. Market participants may feel they have regained some “control” over the US government, potentially influencing a more favorable approach to critical issues.
However, this assumption is not guaranteed. Risk assets were previously caught off guard by Trump’s 90-day tariff pause, only to face significant increases in Chinese tariffs shortly thereafter.
As noted in recent analyses, no G10 currency has a higher positive correlation to news of tariff de-escalation than the dollar. Recent weeks have shown a clear bias towards bearish sentiment regarding the USD, reflecting a lack of confidence in the US as an investment destination.
Markets are likely to be tempted to sell the dollar during rallies at the slightest sign that Trump’s conciliatory tone towards China and the Fed is shifting. Investors will be looking for confirmation of a more optimistic outlook on US assets to justify further dollar appreciation.
In addition to indications from Trump about a new tariff rate for China, much attention was on Treasury Secretary Scott Bessent’s comments at an IIF event yesterday. It is significant that he reiterated the US’s commitment to a “strong dollar policy.”
We have speculated that plans for a weaker dollar (even through a Mar-A-Lago Accord) would only emerge after an initial positive USD response to tariffs had helped protect US consumers from inflation driven by protectionism. While Bessent seemed comfortable with some capital flows moving to the euro, he also confirmed that the dollar’s status as a safe haven remains intact.
It appears the Treasury is concerned about the sudden decline in confidence in the dollar, and Bessent has provided verbal support in consecutive remarks on Tuesday and Wednesday. So far, this approach has been effective.
The dollar has rebounded from Monday’s selloff, but as mentioned, we believe Trump needs to continue delivering positive news to sustain further dollar gains. This morning, we are already observing a tendency to sell dollar rallies, with USD/JPY dropping more than half a percent from the overnight peak
