**US Dollar Holds Steady Amid Trade Tensions; Focus Shifts to Inflation Data**

The US dollar stabilized on Tuesday following the announcement of new tariffs on metal imports by President Donald Trump, creating a surge in demand for the safe-haven currency as concerns over escalating trade tensions mount.

As of 03:50 ET (08:50 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, remained largely unchanged at 108.200. The dollar’s resilience is being attributed to increased market anxiety over potential trade conflicts.

**Tariffs and Market Implications**

Trump’s executive orders, which impose a 25% tariff on all steel and aluminum imports, have sparked fears of a trade war. The prospect of “reciprocal” tariffs on other key sectors, such as automotive, pharmaceuticals, and semiconductors, is causing heightened speculation and uncertainty within the market. Analysts from ING noted, “The DXY dollar index is staying relatively bid above 108.00 as markets remain gripped by the tariff threat.” As traders contemplate these developments, it’s important to stay alert for any further announcements regarding tariff implications, which could impact the market significantly.

In the broader context, Trump’s tariff policies are anticipated to contribute to domestic inflation, which could affect the Federal Reserve’s monetary policy stance. Traders should keep an eye on the upcoming US consumer price index data for January, scheduled for release on Wednesday, as it is poised to influence interest rate expectations.

Moreover, Federal Reserve Chair Jerome Powell’s testimony in Congress over the next two days will likely address inflation and tariffs, providing further insight into the Fed’s future policy decisions.

**European Currency Under Pressure**

Across the Atlantic, the euro remained stagnant against the dollar with EUR/USD trading at 1.0308, hovering near a two-year low. The European Union is already grappling with economic challenges, and the looming threat of additional tariffs from the US casts further uncertainty over growth prospects. Analysts suggest that while the EU’s current tariff regime is relatively low, politicians may be anxious about potential broader tariffs following an upcoming report from the US Commerce Department regarding trade deficits.

The British pound faced downward pressure, trading 0.2% lower against the dollar at 1.2349. The sentiment for the pound has turned cautious as traders recalibrate expectations regarding the Bank of England, especially following comments from policymaker Catherine Mann, who has shifted her stance toward a more dovish approach. Markets are now pricing in the possibility of three additional 25 basis point rate cuts this year, up from the current expectation of 66 basis points.

**Japanese Yen Gains from Rate Hike Speculations**

In Asia, the USD/JPY pair saw slight upward movement to 152.06, although the trading volume was light due to a public holiday in Japan. The yen has recently strengthened amid increasing expectations for possible interest rate hikes by the Bank of Japan, which could provide further momentum to the currency.

Meanwhile, the USD/CNY pair remained relatively stable at 7.3053, with the Chinese yuan receiving a degree of support from government interventions in the face of rising market pressures from US tariffs. However, weak inflation data from China has contributed to ongoing selling pressure on the yuan.

**Conclusion for Forex Traders**

As a forex trader, it’s essential to closely monitor developments in US trade policy, inflation data, and central bank communications over the coming days. Changes in key economic indicators and policy decisions could lead to significant volatility in currency pairs, particularly involving the US dollar, euro, and British pound. Staying informed and adapting trading strategies accordingly could provide opportunities to navigate the shifting forex landscape effectively.