USD strengthened against other major currencies in the European session on Monday as investors responded to U.S. President Donald Trump's latest tariff announcement while awaiting the Federal Reserve chairman Jerome Powell's testimony in Congress and the release of the U.S. inflation data for January later this week.
The U.S. Dollar Index (DXY), which measures the U.S. currency's value relative to a basket of foreign currencies, rose 0.25% from its previous close to 108.31.
Over the weekend, Trump pledged to impose new 25% tariffs on all steel and aluminum imports into the U.S. The announcement added to fears of a global trade war and its economic impact.
Friday's economic releases, which showed a softer-than-anticipated increase in nonfarm payrolls in January but a historically low unemployment rate of 4.0%, a stronger-than-forecast gain in average hourly earnings, and a sharp jump in the year-ahead consumer inflation expectations, reinforced markets bets that the Fed will not hurry with further policy easing. On Wednesday, investors will receive the U.S. January inflation numbers, which could support these expectations.
In addition, attention will be paid to the Fed chair Jerome Powell’s semi-annual reports on monetary policy to the U.S. Senate Committee on Banking, Housing, and Urban Affairs and the U.S. House Financial Services Committee on Tuesday and Wednesday, respectively. Markets do not expect dovish messages from the Fed’s boss.