US dollar heads towards 10-year highs
The US dollar strengthens against major pairs amid global uncertainties, bolstered by a strong economic outlook for 2025, limited rate cuts, and potential shifts in trade policies under Trump.
Key points
- USD/CAD climbs to 1.4409 amid Canadian political uncertainty
- Yen falls to 158.55 per dollar due to BOJ interest rate concerns
- Pound weakens to 1.2321 with US-UK trade policy shifts
- Trump's economic stance supports bullish US dollar outlook
- Rising 10-year Treasury yields reflect faith in US economic fundamentals
US dollar up against major pairs
The US dollar maintains its bullish momentum, showing resilience against most major currencies. The USD/CAD pair has climbed to 1.4409, driven by Canadian dollar weakness linked to political uncertainty following Prime Minister Justin Trudeau's decision to step down, pushing the loonie to its lowest since January 2016. Meanwhile, the Japanese yen has fallen to 158.55 per US dollar, near a five-month low, amidst ongoing interest rate uncertainty from the Bank of Japan. The British pound has also declined significantly against the dollar, reaching 1.2321, its weakest level since April 2024, as uncertainty over trade policies between the UK and US persists amid President-elect Donald Trump's shifting trade policy proposals.
Strong US economic outlook for 2025
As bullish bets started favoring other currencies, the dollar has regained its strength. This resurgence is driven by strong economic conditions, limited interest rate cut forecasts of 36 basis points for 2025, and Trump's assertive domestic and global economic policies.
Additionally, CNN reports that Donald Trump is considering declaring a national economic emergency to justify universal tariffs. Consequently, bond markets have pushed 10-year Treasury yields up by over 8 basis points to 4.728%. Traders now await Nonfarm Payrolls and Unemployment data.
What’s next for USD?
The US dollar's current strength against major currencies has strong potential to persist, underpinned by a strong economic outlook for 2025 and limited interest rate cut forecasts of just 36 basis points. The dollar's resilience is further supported by geopolitical factors, such as political uncertainty in Canada following Prime Minister Trudeau's resignation, which has pushed USD/CAD to new highs, and interest rate uncertainties in Japan affecting the yen. Additionally, the ongoing recalibration of trade policies under President-elect Donald Trump adds to the pressure on the British pound. With Trump potentially declaring a national economic emergency to implement universal tariffs, the US dollar could see further gains as investors seek stability amidst global economic shifts. The bond market's reaction, with 10-year Treasury yields rising, reflects confidence in the dollar, bolstered by strong economic fundamentals. As traders anticipate upcoming Nonfarm Payrolls and Unemployment data, the dollar's trajectory will likely be influenced by these economic indicators, potentially reinforcing its bullish momentum if the data aligns with current positive expectations.
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How to trade US dollar
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD pairs
Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
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