Dollar Rallies as Shutdown Fears Ease, Markets Eye Trade and Geopolitical Risks

Greenback Strengthens Amid Fiscal Certainty, Tariff Uncertainty Lingers

The U.S. dollar extended its rally into Friday, with a key index tracking the greenback advancing for a third consecutive session as a stopgap funding bill appeared set to avert a government shutdown. The move alleviates a major source of uncertainty for markets, which remain on edge over concerns about U.S. economic growth, exacerbated by President Donald Trump’s aggressive tariff policies.

Treasury yields, meanwhile, edged lower after Thursday’s risk-off surge, which saw investors pile into haven assets, sending gold to record highs and reinforcing the dollar’s upward momentum. With Washington’s budget uncertainty temporarily resolved, traders now turn their focus to broader macroeconomic risks, including escalating trade tensions and shifting Federal Reserve policy expectations.

Geopolitics: U.S.-Russia Relations in Focus

In Europe, Russian President Vladimir Putin signaled his willingness to discuss a potential ceasefire in Ukraine with Trump, though he emphasized that any deal must lead to a lasting resolution of the conflict. At the same time, Washington has intensified sanctions on Moscow, restricting payments for Russian energy exports even as it engages in diplomatic talks. The geopolitical standoff is adding to market volatility, with investors closely monitoring any developments that could impact global risk sentiment.

Investor Sentiment: Treasuries Over Equities

Market positioning suggests investors are the most bullish on Treasuries relative to equities in at least three years, a reflection of deepening uncertainty over U.S. growth prospects. Trump’s tariff measures, aimed at reshaping global trade relationships, are increasingly seen as a potential threat to the era of U.S. economic outperformance. The administration reaffirmed its hardline stance on trade late Thursday, with Trump stating that recently enacted tariffs on steel and aluminum would remain in place, while broader reciprocal tariffs on major trading partners could be implemented as early as April 2.

Commodities: Oil Advances, Gold Tests Record Levels

In commodities, crude oil extended gains as tightening U.S. sanctions raised supply concerns. Meanwhile, gold hovered just below the psychologically significant $3,000-per-ounce level, maintaining its role as a preferred hedge amid ongoing economic and geopolitical uncertainty.

Market Outlook: What’s Next?

With a government shutdown averted, markets are recalibrating for the next wave of risks. Traders should watch for signals on the Federal Reserve’s rate trajectory, further tariff announcements, and any geopolitical shifts, particularly in U.S.-Russia and U.S.-China relations. Volatility remains elevated, making a strategic approach to asset allocation critical in the weeks ahead.