The dollar is gaining ground, mirroring the 2022 pattern

• The US dollar is gaining amid persistent inflationary risks.
• Traders are betting on the ECB’s 2022 playbook, selling the euro.

The US dollar has strengthened over five of the last six sessions, driven by increased demand for safe-haven assets and investor confidence that the US economy will fare better than the rest of the world. Purchasing Managers’ Indexes showed clear signs of stagflation, with price indices rising, while overall business activity is slowing. Meanwhile, the European PMI fell to a 17-month low.

According to Joachim Nagel, Donald Trump’s attacks on the Fed are fuelling mistrust in American institutions and a flight from US assets and the dollar. He cited a 2025 Bundesbank study that found that the president’s pressure on the central bank led to rising inflation expectations, lower Treasury bond yields, and a weaker dollar.

Unsurprisingly, Donald Trump’s threats to sack Jerome Powell if he remained in the FOMC after his term as chair expired put pressure on the greenback. However, the growing risks of a renewed escalation of the conflict in the Middle East triggered the opposite process. Instead of fleeing the US, investors are actively buying up American assets. They believe that the US economy will fare better than the rest of the world.

Traders are following the 2022 pattern, when Europe, weighed down by the energy crisis, was unable to offer any resistance to the US, and the EURUSD fell below parity. Not least, this was a consequence of the ECB’s slower response to rising inflation. The Fed began raising rates in March, while the European Central Bank only followed suit in July.

This time, Christine Lagarde and her team intend to act decisively. Bloomberg experts do not expect the ECB to tighten monetary policy in April. However, at the upcoming meeting, the Governing Council is certain to signal its readiness to raise rates.

Meanwhile, the USDJPY’s approach to the psychologically significant 160 mark has triggered a fresh wave of verbal interventions. Finance Minister Satsuki Katayama stated that officials are in close contact with their American counterparts around the clock to counter speculators weakening the yen. The authorities have sufficient funds to counter them.

The FxPro Analyst Team