Investing.com – The US dollar weakened on Friday after US President Donald Trump signaled he would call for lower interest rates, while the euro rose on better-than-expected economic activity data.
At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.6% lower at 107.205, down more than 1% this week.
The dollar weakens due to Trump’s comments
The dollar moved lower on Friday after Trump, speaking online at the World Economic Forum in Davos, Switzerland, said he would call on the Federal Reserve to lower interest rates.
“I will demand that interest rates fall immediately,” he said in a virtual speech. “Similarly, they should fall around the world. Interest rates should follow us everywhere.”
This likely indicates that the pressure will not yet be felt when the FOMC meets next week, ING analysts said in a note. “We expect that a decision to keep rates stable next week will not trigger a new round of USD longs.”
The US currency has fallen behind this week as Trump’s widely expected tariff announcements after his inauguration failed to materialize.
“This appears to reinforce the growing sense that Trump is doing too little on protectionism compared to comments made before his inauguration, and that some of those tariff threats may ultimately not materialize as long as trade concessions are made ,” said ING.
Euro gain on PMI data
In Europe, yields rose 0.8% to 1.0500, boosted by better-than-expected eurozone activity data for January as the region returned to growth.
The provisional index of HCOB rose to 50.2 in January compared to 49.6 in December, reaching just above the 50 mark, which separates growth from contraction.
An index measuring the bloc’s dominant industry fell to 51.4 from 51.6 but remained above breakeven, while the manufacturing PMI rose from a revised 45.1 to 46.1, still shrinks.
The European Central Bank president will speak later in the session in Davos, after citing the need for gradual interest rate cuts earlier this week ahead of next week’s policy-setting meeting.
“With external uncertainty remaining high and the prospects of budget cuts at the European Central Bank having already been taken into account, the arguments for a recovery of business confidence in the eurozone in the short term are not very convincing. This should ultimately enable the ECB to stick to its plan to push interest rates towards 2% this year,” ING said.
traded 0.7% higher at 1.2436, getting a boost after January PMI data came in stronger than expected, adding to hopes of a gradual economic recovery.
The S&P Global preliminary index rose to 50.9 in January from 50.4 in December, remaining in expansion territory.
BOJ meeting threatens to be big
In Asia, yields traded 0.5% lower at 155.23, following 25 basis point rate hikes earlier Friday, while inflation is expected to remain supported and close to its annual target in coming years.
The central bank indicated that it plans further interest rate hikes if its economic outlook in the coming months is in line with expectations.
traded 0.7% lower at 7.2385, with the Chinese currency helped by prospects of a gradual implementation of US tariffs, with Trump sounding conciliatory of late.
