The US Dollar (USD) strengthened on Tuesday after initial weakness, driven by President Donald Trump’s tariff threats on China, Mexico, and Canada, which shifted market sentiment and boosted the USD Index amid a souring risk mood. Following reports that Trump refrained from announcing day-one tariffs, he later signaled potential tariffs, including a 25% levy on imports from Mexico and Canada and conditional measures tied to a TikTok deal with China, fueling the dollar’s rally. Currency markets reacted sharply: GBP/USD remained below 1.2300 despite UK unemployment ticking up to 4.4% and wage growth meeting expectations; USD/CAD climbed to its highest since March 2020, supported by expectations of a modest Canadian CPI increase for December; and USD/MXN gained over 1% as the Mexican Peso weakened. Meanwhile, EUR/USD lost traction, dropping 0.4% to 1.0375 after Monday’s gains. Gold also saw upward momentum, trading above $2,725, its highest level since November. Market attention remains focused on Trump’s trade policies and upcoming economic data, with heightened volatility reflecting geopolitical and economic uncertainties.


