Fed policy and inflation concerns weigh on dollar’s direction – London Business News | Londonlovesbusiness.com

The dollar recorded some volatility after the previous session’s decline, which was driven by the announcement of Scott Bessent’s appointment as Treasury Secretary and easing tensions in the Middle East.

The greenback may trade sideways as markets assess the broader impact of these recent developments, with traders weighing their potential implications on future economic dynamics.

Market sentiment shifted as President Donald Trump unveiled plans for significant tariffs, including a 25% levy on imports from Canada and Mexico, along with an additional 10% tariff on goods from China.

These moves could trigger inflationary pressures, leading the Federal Reserve to adopt a more hawkish stance in its monetary policy. This, in turn, could provide further support to the dollar, as investors anticipate tighter monetary conditions in response to rising inflation risks.

The market now turns its attention on the upcoming release of the FOMC meeting minutes, which may provide additional insight into the Fed’s policy outlook. Fed members were calling for caution in future decisions despite positive U.S. economic data. Uncertainty surrounds the Fed’s next move, contributing to the prevailing risk sentiment.