Trump Reaffirms Tariff Stance in SOTU, Signaling Potential Boost for US Dollar

President Donald Trump doubled down on his protectionist trade agenda during his State of the Union address, reaffirming his commitment to aggressive tariff policies. Market strategists are now closely evaluating the long-term implications, with many anticipating a significant strengthening of the U.S. dollar. The rationale behind this bullish outlook stems from the view that tariffs serve as a primary tool to reduce trade deficits while simultaneously stoking domestic inflationary pressures. Such inflationary trends typically prompt the Federal Reserve to maintain higher interest rates for longer, further enhancing the greenback's appeal. Additionally, protectionist measures often trigger safe-haven flows into the DXY as global trade tensions escalate. Major currency pairs, including EUR/USD and USD/CNY, are expected to face downward pressure as the dollar gains momentum from these policy shifts.