The US dollar strength keeps breaking records. Jobs data from December was better than expected. The dollar index went up to 109.99, the highest in two years. The euro and pound dropped to their lowest points in years. All this happened because the U.S. economy is doing well.

dollar index 6 months chart
Source: TradingEconomics

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How U.S. Dollar Strength Impacts Global Markets and Forex Trading

currency city
Source: Watcher Guru

Jobs Report Fuels Dollar’s Rally

US Unemployment rate
Source: BLS.gov

The U.S. added lots of jobs in December. The jobless rate fell to 4.1%. This strong dollar impact changed how traders think about rate cuts. They now only expect one small cut in 2025. “With markets currently pricing in just over one rate cut by year-end, the reaction to the inflation print may be relatively measured,” stated Uto Shinohara, senior investment strategist at Mesirow Currency Management.

US Nonfarm payroll employment
Source: BLS.gov

Global Currency Pressures Mount

The euro went down by 0.4% to $1.0208. This is its worst since November 2022. The pound also fell badly to $1.2167. Britain faces big money problems. The US dollar’s strength makes global currency fluctuations worse every day.

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Asian Currencies and Chinese Response

yuan's performance
Source: TradingEconomics

China tried to help its money by making foreign loans easier. They stopped buying some bonds, too. This made bond prices better for a short time. The Forex market trends show even Australia’s dollar hit its lowest point since 2020.

major-currencies-forex
Source: TradingEconomics

Market Expectations and Political Factors

Marc Chandler, chief market strategist at Bannockburn Global Forex, said that “the general bullishness toward the dollar stems from diverging central bank policies and the threat of tariffs.” The strong dollar impact changes how countries buy and sell things. Trump’s coming back could shake things up more with his new rules.

Japanese Yen Developments

The US dollar strength pushed Japan’s money down to 157.7. But things slowed down when Japan’s bank talked about changes. “A more critical inflection point is the Trump inauguration this month, after which we’ll see if Trump’s tariff threats are fully realized or were they a negotiating ploy,” noted Shinohara. If they raise rates soon, it could change forex market trends a lot.

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