US Dollar Index gathers strength above 97.50 as Trump announces new tariffs

• The US Dollar Index gains ground to near 97.80 in Friday's Asian session. 
• Trump on Thursday announced a 35% tariff on Canadian imports, starting August 1.
• US Initial Jobless Claims declined to 227K last week, a seven-week low.

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, edges higher to around 97.80 during the Asian trading hours on Friday after US President Donald Trump announces new tariffs and says that he plans to impose blanket duties of 15% or 20% to the remaining trade partners.

Late Thursday, Trump announced a 35% tariff rate for goods imported from Canada, beginning August 1. Trump said that the 35% tariffs will be separate from all sectoral tariffs, adding that the levies might be increased if Canada continues to retaliate.

Trump's letter to Canada comes after he delivered more than 20 letters to trading partners this week alerting them of the tariff rates that would apply to their exports on August 1, assuming no trade agreements are reached. Trump said that the European Union (EU) would receive a letter notifying them of new tariff rates 'today or tomorrow.'

"We're just going to say all of the remaining countries are going to pay, whether it's 20% or 15%. We'll work that out now," said Trump. 

Trump on Wednesday also announced plans for tariffs on copper, semiconductors and pharmaceuticals, and imposed a 50% tariff rate on Brazil, one of the highest so far announced for the levies, which will take effect in August.

The lingering threat to inflation from tariffs might convince the US Federal Reserve (Fed) to hold off on cutting interest rates until next year. This, in turn, could provide some support to the Greenback. The markets are now expecting 50 basis points (bps) worth of Fed rate reductions by the end of this year, starting in October.

The US Initial Jobless Claims for the week ending July 5 declined to 227K, compared to 233K in the previous week, the US Department of Labour (DOL) revealed on Thursday. This figure came in lower than the market consensus of 235K. This report suggested that employers may be holding on to workers and showed that there is no urgency for the US central bank to resume its rate reductions, which lift the USD.