Major cryptocurrencies experienced two-way price action early Friday, as the dollar remained strong against major fiat currencies following President Donald Trump’s announcement of new tariffs.
Bitcoin (BTC) fell to $114,290, nearly testing the bullish trendline drawn off April and June lows, but has since recovered to trade near $115,900, according to RialCenter data. Ether (ETH), the second-largest token by market value, mirrored BTC’s price action, recovering from an early drop to $3,616 to trade near $3,690.
The early jitters likely stemmed from Trump’s extensive tariffs and the continued rise in the dollar index (DXY) above 100, the highest level since late May. The DXY, which tracks the value of the dollar against major fiat currencies, has gained over 3% in four weeks, suggesting potential financial tightening that often leads traders to minimize exposure to riskier assets.
Inflation Fears Lift DXY
According to Robin Brooks, a senior fellow at the Brookings Institution, signs of tariff-driven inflation in the U.S. are propelling the dollar higher.
“There are many reasons people cite for the Dollar’s decline this year. At the core of it is a simple macro narrative: tariffs were expected to raise inflation, but that did not happen as quickly as anticipated. Now, it is occurring. Inflation is on the rise…,” Brooks stated.
Late Thursday, Trump announced sweeping tariffs on a global scale. The new order retained the “universal” tariff for goods entering the U.S. at 10%, as announced on April 2. This rate will apply only to countries with which the U.S. has a trade surplus, while countries exporting more to the U.S. will face a 15% tariff floor. Additionally, some Southeast Asian countries have been subject to higher tariffs.
These new tariffs are likely to worsen the inflationary effects of the earlier taxes announced this year. Data released Thursday indicated that the impact of the original tariffs began to influence the Fed’s preferred inflation measure, the core PCE, in June.
The personal consumption expenditures price index rose 2.6% year-over-year in June, up from 2.4% in May. The core figure, excluding volatile food and energy prices, also rose 2.8% over the year, matching May’s pace and tying for its highest since February.
The renewed rise in inflation will likely complicate the Fed’s ability to cut rates quickly, as desired by President Trump. Earlier this week, the central bank maintained rates at 4.25%, dampening traders’ hopes for rate cuts in September.
“Markets have adjusted their expectations for a September rate cut. According to the CME FedWatch Tool, the likelihood of a cut next month has decreased to just 41%—down from 58% a week ago and over 75% a month ago. The Fed’s decision to keep rates steady this week and Chair Powell’s call for ‘greater confidence’ in disinflation have clearly resonated,” said Matt Mena, crypto research strategist at 21Shares, in an email.
Mena added that the focus is now on Friday’s U.S. nonfarm payrolls report.
Yen Slides Ahead of Payrolls
The Japanese yen depreciated past 150.50 per dollar in Tokyo morning trading, marking its lowest level in four months.
This decline followed Thursday’s comments from BOJ Governor Kazuo Ueda, indicating that the Japanese central bank is cautious about implementing further rate adjustments soon.
Both the yen and BTC are likely to see increased volatility following the release of Friday’s payroll figures.
“The data will likely determine whether Powell is clear to act or whether the Fed remains on the sidelines,” Mena stated. “For crypto, looser financial conditions would be a significant tailwind. Bitcoin has historically tracked global liquidity with a short lag. If labor data confirms a cooling economy and the Fed pivots, BTC could continue its ascent, with $150K and $200K still within reach this cycle.”
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