The US dollar index rose to a two-year high, and the market expected the Federal Reserve to cautiously cut interest rates in 2025

The US dollar index rose to a two-year high as the market expects the Federal Reserve to adopt a more cautious rate cut approach in 2025. The market is betting on the policies of the president-elect Trump, including proposed trade tariffs and tax cuts, which will exacerbate inflation and limit rate cuts. According to Mohammed Saleh of Danske Bank, as the US economy is resilient, the market expects the rate cuts will not exceed two 25-basis-point cuts for the full year, which will support the US dollar. In December last year, the Federal Reserve also hinted at slowing the pace of rate cuts.