Bullish sentiment is high! Wall Street collectively bets: Trump taking office will further boost the surge of the US dollar.

According to Wall Street forecasts, with the resilience of the US economy and expectations of interest rate cuts decreasing, as well as the pledge by incoming US president Trump to impose harsh tariffs, the US dollar will further rise. Currency strategists at major banks such as Goldman Sachs, Morgan Stanley, and Deutsche Bank predict that the US dollar will continue to strengthen this year. The Bloomberg US Dollar Spot Index rose for the fifth consecutive trading day on Monday. Data from the Commodity Futures Trading Commission (CFTC) for the week ending January 7 showed that speculative traders, including hedge funds and asset management companies, are the most bullish on the dollar since 2019, increasing their total bets on the dollar to around $33.7 billion. Monex forex trader Helen Given said, "We believe the dollar will maintain its lead. If we see the dollar index rise to the levels of November 2022, it is likely to happen around the time of Trump's inauguration ceremony." Currently, the dollar index is only 2.8% away from its peak in 2022. The cost of hedging against further dollar appreciation over the next year has risen to its highest level in almost two years. Trump's tariff plans and hints from the Federal Reserve that they may take a more cautious approach to interest rate cuts have fueled this rise. A strong jobs report released last week prompted major Wall Street banks like JPMorgan to lower their expectations for interest rate cuts this year. Despite the dollar being at historically high levels, traders are increasingly bullish on the dollar. Paresh Upadhyaya, Director of Fixed Income and Currency Strategy at Amundi US Inc., and strategists at Morgan Stanley predict that the dollar will retest the highs of 2022. Strategists led by Kamakshya Trivedi of Goldman Sachs have raised their expectations for the dollar, now forecasting a 5% rise over the next year, marking the second such adjustment in about two months. Meanwhile, strategists at Deutsche Bank led by George Saravelos predict that the Euro against the US dollar will fall below parity this year, fluctuating between 0.95 and 1.05, largely due to the widening gap in policy expectations between the Federal Reserve and the European Central Bank. Currently, the Euro has fallen to a two-year low below 1.02, while the troubled British pound has dropped to its lowest level since November 2023 and the Australian dollar has fallen to its lowest level since the early stages of the pandemic. Deutsche Bank also recommends buying into the dollar against the yen as it rises from the current level of about 157 to 160, even as the Bank of Japan is expected to raise interest rates. Saravelos and others wrote in a report that it is not yet clear whether rate hikes will benefit the yen. Upadhyaya of Amundi said, "With rising global inflation uncertainty due to tariff concerns, the Federal Reserve may take measures to pause rate cuts, leading to a widening interest rate differential that benefits the dollar." Trump recently reiterated that he will not scale back his tariff plans, with reports suggesting he is considering declaring a national economic emergency to provide legal grounds for imposing tariffs more widely. As traders await more details on tariffs, these comments will continue to impact the market. And as global investors chase higher returns, US Treasury bonds continue to attract international inflows. Since September last year, the yield on the benchmark 10-year bond has risen by over a percentage point, returning to the key level of 5%. Kathy Lien, Senior Forex Trader and Managing Director of New York-based BK Asset Management, said, "Significant changes in macro fundamentals need to occur for a meaningful shift in sentiment towards the dollar."