Dollar Slips After Trump Speech

The dollar index slipped below 97.8 on Wednesday, giving back some of the previous session’s gains after President Donald Trump offered no indication of altering his tariff policies in his State of the Union address. Trump expressed confidence that foreign countries would honor their trade agreements and suggested that tariffs could eventually replace income taxes. The US began implementing a temporary 10% global tariff on Tuesday, which the White House is reportedly aiming to raise to 15%, following the Supreme Court’s decision to strike down Trump’s reciprocal tariffs. On the monetary policy front, Susan Collins stated that holding interest rates steady is likely appropriate amid an improving labor market and persistent inflation risks, while Thomas Barkin added that policy is well-positioned to manage economic risks. Nevertheless, markets continue to price in roughly three 25-basis-point rate cuts from the Fed this year.

The dollar index remained around 97.8 on Wednesday after advancing in the previous session, supported by rising expectations that the Federal Reserve will keep interest rates unchanged for an extended period. Fed official Susan Collins noted that holding rates steady is likely appropriate given an improving labor market alongside persistent inflation risks, while Thomas Barkin added that monetary policy is well-positioned to manage risks around the economic outlook. Despite this, markets still price in roughly three 25-basis-point rate cuts from the Fed this year. Meanwhile, the US began implementing a temporary 10% global tariff on Tuesday, which the White House is reportedly seeking to raise to 15%, following the Supreme Court’s decision last week to strike down Donald Trump’s reciprocal tariffs. Geopolitical risks also weighed, with investors focused on the third round of US-Iran nuclear talks scheduled in Geneva on Thursday.

The dollar index climbed above 97.8 on Tuesday after coming under pressure in the previous session, as investors continued to assess US trade uncertainty. In the latest developments, global logistics giant FedEx filed a lawsuit seeking a full refund after the US Supreme Court struck down President Donald Trump’s emergency tariffs. Over the weekend, Trump threatened to lift global tariffs from 10% to 15% in response to the ruling and cautioned that countries that “play games” with existing trade agreements could face steeper duties. The shifting policy backdrop has raised fears that current trade deals may unravel, though major trading partners have so far honored their agreements with Washington. On the geopolitical front, markets remain focused on renewed talks between the US and Iran scheduled for Thursday. Elsewhere, Japanese media claimed that US authorities led the rate checks conducted last month to prop up the yen.