The dollar index rose to approximately 108.4 on Tuesday, recovering some of the losses from the previous session after US President Donald Trump stated he was considering 25% tariffs on Canada and Mexico as early as Feb. 1, citing concerns over illegal immigration at the US border. Trump also mentioned China but did not provide further details. The dollar has been gaining momentum since October, driven in part by concerns that Trump’s "America First" policies and pro-growth stance could spur inflation, which in turn might prevent the Federal Reserve from further rate cuts. However, signs of cooling US inflation have increased expectations for a more dovish Fed policy, with markets now pricing in two 25 basis point rate cuts this year. The dollar strengthened broadly, with the Canadian dollar and Mexican peso facing the largest declines.
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