The former president’s call for 100% tariffs on BRICS members, coupled with his resolute support for the greenback, helped propel the Dollar Index (DXY) up by half a point, pushing it back to the 106 zone.
As the world watches BRICS aim to decrease the dollar’s global use, the U.S. has made it clear: it’s willing to do whatever it takes to preserve the dollar’s role as the global reserve currency.
While BRICS, an alliance focused on bolstering trade and political cooperation, works to reduce its reliance on the dollar, the U.S. remains resolute in defending its currency’s hegemony.
Trump’s hard-hitting actions highlight that Washington views the growing influence of these nations as a direct challenge to American interests.
Despite BRICS’ goal of reducing dollar dependence, the union still faces significant challenges. The economic instability of major members, including China’s slowdown and Russia’s ongoing struggles, limits the group’s effectiveness.
But Trump’s combative response suggests that even these early steps are perceived as a threat to U.S. influence. With the recent addition of Iran and Saudi Arabia, BRICS has expanded to 10 members, but it remains unclear how much progress the group can make in terms of its objectives.
Trump’s tariff threats could force BRICS to delay some of its planned initiatives, at least for now. However, the immediate market response to Trump’s comments has been relatively muted.
U.S. Treasury yields edged higher, while gold saw a slight dip. Meanwhile, emerging market currencies continue to weaken against the dollar, reflecting the growing pressure on non-dollar assets.
The market’s attention this week shifts toward a packed U.S. economic calendar, with key data points expected to steer sentiment. Non-farm payroll data on Friday will offer vital insights into the health of the U.S. job market and wage trends.
In addition, PMI data for manufacturing and services will provide a snapshot of broader economic activity, making it a crucial week for gauging the U.S. economy’s momentum.
At present, the market is pricing in a 66% chance of a 25-basis-point rate cut by the Fed in December. How the data plays out this week, combined with Jerome Powell’s speech on Wednesday, will likely dictate market expectations and could spark increased volatility.
In addition to Trump’s clash with BRICS, tensions in the Middle East are also heating up. Escalating violence between Israel and Hezbollah, along with rising tensions in Syria, could reignite global risk aversion.
If tensions persist, we could see investors flocking to safe-haven assets. However, at this moment, the market’s focus remains on U.S. data and Powell’s comments, leaving geopolitical risks only partially priced in.
Trump’s remarks and the anticipated data flow have set the stage for another week of dollar strength. As markets await more clarity on the economic outlook, it’s clear that the dollar is likely to remain in focus.
A stronger dollar against major currencies could exert pressure on emerging markets, especially if the DXY sustains its position above key technical levels.
The dollar index’s recent recovery, which began in September, encountered a brief setback in November due to pre-election uncertainty. Trump’s election victory and assertive stance on the dollar have reignited upward momentum.
Last week’s retreat in the DXY, exacerbated by low trading volumes during Thanksgiving, was tempered by expectations of a rate cut in December. However, inflation data released last week showed signs of resilience, providing support for the greenback.
The DXY is currently testing support at 106.2, a critical level for determining its next move. If the index holds above this level, it could make a push toward the 108 zone, driven by a shift in funds from riskier assets to dollar-based investments. A breakdown below 106.2, however, could signal further downside, with the next support level at 105. A test of these key levels this week will likely set the tone for the dollar’s trajectory in the near term.
As Trump’s rhetoric and economic data shape the dollar’s outlook this week, market volatility is expected to remain high. While BRICS’ influence may be limited, its challenge to the dollar’s supremacy cannot be ignored. For now, traders will be closely watching the DXY, U.S. economic data, and geopolitical developments, as the dollar’s fate hangs in the balance.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
This article was originally published here.
