USD Strengthens on Trade Tensions; Fed Resists Cut Pressure vs ECB

The US dollar gained 0.4% against major currencies as escalating trade tensions and new tariff proposals sparked risk-off sentiment and inflation concerns. Markets are pricing in sustained hawkish Fed policy as officials resist political pressure for rate cuts, contrasting sharply with the ECB's dovish stance. EUR/USD dropped to 1.0820 while USD/JPY climbed above 155.50 as traders position for diverging central bank policies. Trade war fears intensified following announcements of potential tariff hikes on Chinese and European imports, potentially adding 0.3-0.5% to US inflation projections. The Fed's commitment to fighting inflation despite political headwinds strengthens the dollar's appeal versus the euro, where ECB officials signal openness to further easing. Technical indicators suggest continued USD strength with EUR/USD targeting 1.0800 support while resistance emerges at 1.0875.