Stock market today: Dow, S&P 500 edge higher with Trump tariffs, jobs report in focus

The US dollar (DX=F, DX-Y.NYB) extended its rebound on Wednesday, adding to gains after the currency was on track for a one-week low following a report from the Washington Post on Monday that suggested President-elect Donald Trump won’t commit to an aggressive tariff plan.

But just two days later, CNN reported Trump could declare a national economic emergency to enact universal tariffs, pushing the dollar even higher as equities faltered.

The US dollar “is priced to perfection,” Bank of America’s global rates and currencies research team, led by FX analyst Athanasios Vamvakidis, wrote in a note published on Wednesday. “The USD has rallied strongly since the US election, from an already high level.”

The currency’s price action has largely been driven by two main catalysts: Trump’s election and the subsequent Republican sweep, along with the recalibration of future Fed easing in the face of strong economic data.

“American exceptionalism in terms of better economic growth, faster productivity growth, superior equity market performance, and higher yields all act as a collective magnet for attracting capital to the United States,” wrote Blake Millard, director of investments at Sandbox Financial Partners.

Even data that’s often viewed as not so good, like sticky pricing pressures and inflation headwinds, can be positive for the dollar.

“With the Federal Reserve expected to cut rates less than most other major central banks, expected interest rate differentials favor the greenback,” Millard wrote. “Also, tariffs will restrict the flow of goods leading to fewer dollars going abroad and reducing the demand for foreign currency.”

And with most economists in agreement that Trump’s proposed tariff plans will lead to higher inflation over time, the cycle surrounding bullish dollar sentiment remains intact.

Read more about where the dollar could be heading here.