US Dollar Reaches Two-Year High Amid Rate Speculation

The U.S. dollar has surged to its highest level in over two years, driven by robust economic data and traders reassessing the likelihood of interest rate cuts in 2025, particularly in light of President-elect Trump's anticipated policy changes. Analysts from Goldman Sachs and Bank of America foresee a stronger dollar, predicting a 5% rise attributed to continued economic growth and new tariffs. The upcoming U.S. Consumer Price Index (CPI) report is expected to show annual headline inflation rising to 2.9%, which could influence the Federal Reserve's monetary policy, as signs of persistent inflationary pressures might deter rate cuts. With the Federal Reserve's cutting cycle likely concluded, market participants are shifting their focus to inflation expectations and the implications of Trump's economic agenda, including tax cuts and tariffs. The dollar's strength is putting pressure on other major currencies, notably the euro and pound, which are experiencing declines against the dollar. Overall, the market sentiment indicates a cautious outlook as inflation concerns persist amid economic growth projections.