**US Dollar Strengthens Amid Trade War Concerns; Euro and Sterling Weaken**

The forex market witnessed a notable uptick in the US dollar on Monday as investors reacted to mounting fears of a global trade conflict, ignited by US President Donald Trump’s announcement of potential new tariffs on metal imports. This development has led to increased demand for the dollar, traditionally viewed as a safe-haven currency, while both the euro and British pound faced downward pressure.

As of 04:00 ET (09:00 GMT), the Dollar Index, which measures the dollar’s performance against a basket of six major currencies, rose by 0.2% to 108.140. The dollar’s increase reflects a growing apprehension regarding a potential trade war following Trump’s announcement of a 25% tariff on all steel and aluminum imports. Alongside this, he indicated that reciprocal tariffs could be imposed on key trading partners, further exacerbating trade tension.

Analysts at ING have expressed that this environment of uncertainty regarding the nature and scope of tariffs is likely to underpin the dollar throughout the week. They noted, “Long dollar positions may face risks if market sentiment shifts positively towards European economic prospects, particularly in light of discussions around a possible ceasefire in the ongoing Russia-Ukraine conflict.” However, for now, they expect the DXY to maintain a range between 108 and 109 in the near term.

Traders are also advised to keep an eye on upcoming US economic indicators, particularly the inflation data set for release on Wednesday, alongside key testimonies by Federal Reserve Chair Jerome Powell on Tuesday and Wednesday, which could provide further insight into monetary policy directions.

**Euro and Sterling Slide**

Turning attention to Europe, the euro faced pressure as EUR/USD dipped 0.1% to 1.0316, lingering just above a two-year low due to fears of potential tariffs affecting European imports. Analysts warn that if reciprocal tariffs are implemented, the currency pair could potentially test support at 1.0225. The upcoming US Consumer Price Index (CPI) report is also a factor contributing to the bearish sentiment surrounding the euro.

Similarly, GBP/USD saw a slight decline, trading down 0.1% to 1.2397. The pound’s downturn comes on the heels of the Bank of England’s recent interest rate cut, adding to the currency’s vulnerability amid the trade tariff threats. Traders should also monitor remarks from Catherine Mann, a prominent member of the Bank of England, who is expected to shed light on recent monetary policy decisions.

**Japanese Yen Retreats**

In the Asian markets, the yen experienced a drop, with USD/JPY rising by 0.6% to 152.37, bouncing back from a previous low. The yen had surged in response to solid wage data and hawkish indications from the Bank of Japan regarding future rate hikes. However, disappointing current account data, highlighting a decrease in Japan’s surplus, has contributed to the yen’s recent retreat.

Additionally, USD/CNY edged up 0.3% to 7.3074, influenced by trade discussions and disappointing inflation data from China, which reflected ongoing economic challenges within the country.

**Conclusion**

As ongoing geopolitical tensions and economic data releases loom, forex traders should maintain vigilance, particularly with key announcements from central banks and potential shifts in monetary policy directions. The current landscape suggests the dollar may remain favorable in light of trade uncertainties, while the euro and pound could face headwinds.