Market expectations for Trump-led government policies are impacting the dollar’s movement. There is anticipation that Trump’s administration could implement higher tariffs and stricter immigration policies, potentially driving inflation higher. If inflationary pressures persist, the Fed may delay further rate cuts, providing more support for the dollar. Additionally, increased fiscal spending under Trump has pushed up Treasury yields, making the dollar even more attractive.

According to Edison Research, both the House and Senate are expected to be under Republican control following Trump’s inauguration, providing him with significant leverage to implement tariff and spending policies.

Chris Weston, Head of Research at Pepperstone, noted that the dollar’s strength is mainly supported by interest rate differentials, momentum, economic growth differentials, and fiscal and tariff policies. While the dollar’s strength isn’t expected to last indefinitely, Weston suggests that dollar demand could increase further until the U.S. economy shows significant weakening, which may lead to more market sell-offs.

Kyle Rodda, a financial market analyst at Capital, commented that gold prices are currently driven by the dollar and bond yields, causing technical downside for gold. While recent U.S. inflation data indicates a possible small rate cut by the Fed next month, inflation is still expected to remain high next year, which could limit the frequency of rate cuts.

Wednesday’s data showed that U.S. consumer prices in October met expectations, with overall inflation levels easing. However, Federal Reserve officials remain cautious about future rate cuts due to ongoing inflation risks, adding to the volatility in the gold market.