The U.S. dollar index flexes its strength in the new year, reaching levels not seen in two years. This rise is supported by the so-called ‘Trump Trade,’ the expectation of only two more rate cuts this year, and the weakness of other currencies in the basket.

The U.S. dollar continues to show its strength against other global currencies after President-Elect Donald Trump’s victory at the polls. The index, which represents the relation of the U.S. dollar against a basket of other relevant fiat currencies, reached its highest level in 26 months yesterday, showing a generalized trust in the currency’s future in the hands of the future administration.

The “Trump Trade,” or the expectation of an economic boom in the U.S. market unleashed by Trump’s upcoming deregulation and investor-friendly policies, has been part of this continued rise.

Read more: Trump Effect: Yuan Continues Free Fall as Tariff Threats Grow

Susannah Streeter, head of money and markets at Hargreaves Lansdown, stated that the numbers indicate the U.S. economy has continued to grow in a high interest rate and low unemployment situation.

She declared:

Investors are hopeful that a goldilocks scenario will be the story of 2025, amid promises of lower taxes and deregulation under a second Trump presidency.

This show of strength is expected to continue to develop into 2025, as the euro has hit its lowest point since November 2022, hit by weak economic forecasts and the active menace of tariffs on Europe’s economy.

Also, the relatively weak dovish stance of the Federal Reserve, which is expected to cut interest rates twice in 2025, would support the current dollar index rise. This is because higher interest rates are generally linked to domestic currency resilience.

Other analysts remarked that the currency would be unstoppable unless a black swan event happens. Adam Button, chief currency analyst at Forexlive, stated:

In terms of 2025 economic growth, there’s no rival to the dollar. Capital flows dominate the turn of the year and the U.S. stock market has really put to shame every other global market.”

“The dollar is the only game in town until there is a genuine stumble in the U.S. economy,” he concluded.

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