Investing.com – The US dollar edged lower on Monday, with last week’s jobs report pointing to another Fed cut later this month, but losses were minor amid renewed uncertainty in the Middle East.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105.550.
The dollar rally looks tired
The dollar’s rally following Donald Trump’s victory in the US presidential election is starting to look a bit tired as the year draws to a close, with the Federal Reserve widely expected to cut rates again next week, even following a recovery in US job growth. November.
“Much of the positive story on the US dollar is in the price – from strong US data to trade and fiscal risks – and the positioning is quite long dollar,” say analysts at Morgan Stanley (NYSE:) said in a note.
However, the economy has only fallen less than 0.5% over the past week as safe haven support remains, especially given increased geopolitical tensions.
Rebels in Syria have ousted President Bashar al-Assad and taken control of the capital Damascus, while the Middle East remains in turmoil as the war between Ukraine and Russia continues.
Add to that political instability in South Korea, where the country is widely seen as a pillar of the East Asian economy, and it’s no surprise that the U.S. currency retains supporters.
“There appears little reason to unwind long positions in the dollar at this time and after two weeks of consolidation, we believe it is more likely that the dollar will resume its bull trend,” ING analysts said in a note.
The US figures for November will be released on Wednesday, which could provide more insight into the Federal Reserve’s interest rate trajectory.
The euro awaits the final ECB meeting
In Europe, yields rose to 1.0579, with traders awaiting the European Central Bank’s latest interest rate decision on Thursday, the last policy meeting of the year.
The ECB will broadly agree to a new interest rate cut of 25 basis points, the fourth cut this year.
Eurozone inflation rose in November but still appears to be heading towards the ECB’s 2% target, with some signs of easing wage pressures.
Since the ECB’s last meeting in October, tariff risks for Europe have increased following Trump’s election victory; France and Germany are experiencing political unrest; business activity has slowed sharply and the euro has weakened.
“There certainly seem to be few reasons for the ECB to be cheerful at the moment, even if the hard figures are holding up better than expected,” ING said.
was trading 0.3% higher at 1.2776, with sterling holding up reasonably well as efforts to tackle inflation remained stubbornly high.
in Britain rose by 2.3% in the 12 months to October, meaning inflation is back above the Bank of England’s target.
Britain’s central bank cut interest rates in November for the second time in 2024, and will ease monetary policy more slowly in 2025 than its main rivals.
BOJ going for a walk next week?
In Asia, growth rose 0.3% to 150.44 after revised data showed Japan’s economy grew slightly stronger than expected in the third quarter. However, the value was well below the increase in the previous quarter.
Investors remain divided over whether interest rates will be raised next week after Monday’s economic growth data.
rose 0.1% to 7.2748 after data showed China’s economy contracted more than expected in November despite recent stimulus efforts. Producer price inflation also remained subdued in November.
The focus this week will be on China’s annual Central Economic Work Conference for signals of more stimulus from the country’s central bank.
rose 0.9% to 0.6444, ahead of Tuesday’s Reserve Bank interest rate decision. Rates are expected to remain unchanged, but it could temper its hawkish stance amid signs of weakening economic conditions in Australia.
rose 0.5% to 1,431.49, hovering near a two-year high, as South Korea’s political crisis intensified after prosecutors on Sunday launched a criminal investigation into President Yoon Suk Yeol over his failed attempt to to impose martial law in the country last week.
Yoon survived an impeachment vote in the opposition-controlled parliament on Saturday, but the head of his own party said Yoon would be sidelined before ultimately stepping down.
