By Frank Walbaum, Market Analyst at Naga
The dollar could remain under pressure after President Donald Trump’s State of the Union address offered no indication of a shift in trade policy. The reaffirmation of a temporary 10% global tariff, potentially rising to 15%, keeps trade risks elevated and fuels concerns about new measures. A renewed escalation in trade tensions could revive the risk-off dynamics that previously weighed on US assets and the currency.
On the monetary front, Federal Reserve officials maintained a cautious tone. Federal Reserve Bank of Boston President Susan Collins signaled that holding rates steady remains appropriate given labor market improvements and lingering inflation risks, while Richmond Fed leader Thomas Barkin emphasized that policy is well calibrated to manage current economic conditions. That messaging has supported a modest rise in Treasury yields across maturities, helping to anchor the dollar. Markets continue to price two 25-basis-point interest cuts this year.
Meanwhile, private-sector employment data showed steady momentum, with hiring accelerating for a fourth consecutive week. Attention now turns to the release of initial jobless claims. A reading consistent with labor resilience could reinforce yield support and stabilize the dollar, while a surprise deterioration would quickly challenge that narrative and weigh on the currency.