A shake in the dollar and Bitcoin after denying Trump’s comments about tariffs
Bloomberg Spot Dollar Index
The Bloomberg Dollar Index ended the session down 0.6% after earlier falling by more than 1%, the largest drop in a day since 2023, following a report by the American newspaper The Washington Post stating that Trump’s aides are considering developing a tariff plan that covers basic imports only.
The euro rose by about 1.3% against the dollar, which is the largest gain for the single currency during the day in 14 months, while the British pound also jumped by about 1%.
What did the analysts say?
“The initial dollar loss was an overreaction to an uncertain report but shows the direction of things later under certain conditions,” said Kathleen Brooks, director of research at XTB. “We have seen a significant buildup of dollar buying and it is at risk of turning around.” .
Traders cut their bets on currencies and erased gains in bonds after Trump wrote on Truth Social that the Washington Post report was “wrong” to say his tariff policies would ease.
The president-elect said in a separate post that United States Steel Corp., whose merger with Nippon Steel Corp. was blocked by President Joe Biden, would be a “more profitable and valuable company” under the tariffs.
Dollar fluctuations
According to CFTC data collected by Bloomberg since 2003, speculative traders in the last three months of 2024 boosted their bullish expectations for the dollar by the largest margin ever in a quarter.
After entering October with a net short position in the US currency, traders held about $31.4 billion in long bets through December 31, the most since April, according to the latest Commodity Futures Trading Commission figures published on Monday.
Trump and tariffs
Citigroup strategists, including Daniel Tobon, said: “Trump’s tariff talk may end up being worse, but we expect it to get louder in the coming weeks. This time, tariffs and trade negotiations are likely to start on day one and so we expect that Investors want to hold the US dollar longer than they did in 2017.”
The dollar benefited from expectations that Trump will impose tariffs on major US trading partners, which will hurt currencies including the yuan and the euro.
The Washington Post also reported that Trump was considering a so-called global tariff program, which means it applies to every country.
Trump’s policies and threats
Trump’s threatening trade policies have dominated discussions among investors and economic policymakers since his election victory in November, and his broad tariff program could hurt global economic growth and raise consumer prices.
Read also: The dollar advances at the beginning of 2025 as US interest rate expectations change
Bitcoin movements
Macroeconomic factors continue to weigh heavily on Bitcoin’s ever-evolving life cycle as it is an asset increasingly favored by Wall Street.
A report published by the Washington Post stated that Trump’s tariffs may not be as wide-ranging as previously thought, which led to a decline in the value of the dollar and the price of Bitcoin to fluctuate by about 2% immediately. President Trump later refuted this report and Bitcoin reduced its gains.
However, Bitcoin has managed to maintain its momentum at the start of the year, regaining the $102,000 level on Monday – after ETF inflows continued to rise as well.
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Reports indicated that more than $500 million flowed into the Bitcoin ETF category during the first three days of the year.
Dollar and Bitcoin forecast
The macroeconomic environment is likely to remain a focal point for cryptocurrency markets heading into 2025.
Bearish dollar volatility caused by further rumors about a possible rollback of Trump’s tariffs is likely to continue to inject volatility into global markets. Bitcoin’s recent price movements reflect this as traders closely monitor the dollar index for signals.
As fiscal and monetary policies are shaped under the new administration, the cryptocurrency market is likely to see increased activity.
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