Investing.com – The US dollar rose on Monday, continuing the positive tone generated by the new Trump presidency, ahead of the release of key inflation data and with a number of Federal Reserve speakers this week.
At 04:20 ET (09:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% higher at 105.207, after rising 0.6% last week.
The dollar retains its strength
The dollar rose to a four-month high last week after Donald Trump claimed a return to the White House, with his tariff and immigration policies seen as inflationary and thus likely to prompt the Federal Reserve to raise interest rates at a slower and to slow down the pace.
Although the dollar’s rally was slowed by a rate cut by the Federal Reserve, it still retained much of its recent gains.
“The thesis for the dollar bear now is that it will take a while for rates to come through and that the Federal Reserve’s recalibration to a less restrictive monetary policy – plus seasonal patterns for the dollar at the end of the year – will lead to a benign decline in the dollar could lead by the end of the year. ING analysts said in a note.
“We disagree and believe this clean election result could boost American consumer and business confidence while at the same time weighing on business confidence elsewhere in the world.”
Trading will likely be light Monday (NASDAQ:) as US bond markets are closed for a holiday, with attention turning to the October earnings release expected on Wednesday.
A slew of Federal Reserve officials will also speak this week, after the bank cut rates by 25 basis points last week.
Euro rate lower
In Europe, yields fell 0.3% to 1.0688, influenced by Trump’s proposals for import duties, which could hurt European exports, and political unrest in Germany, the euro zone’s largest economy.
German Chancellor Olaf Scholz fired his finance minister last week, paving the way for early elections after months of disagreements in his three-party coalition.
The latest reports suggest that “a vote of no confidence could be held in December and snap elections as early as February. “It seems like a leap of faith at this stage to expect a complete turnaround in Germany’s fiscal position and instead the responsibility will fall on the European Central Bank to support the eurozone economy,” ING added expected that the ECB would cut interest rates by 50 basis points. December.
fell 0.2% to 1.2900 after the ECB implemented its second interest rate cut since 2020 on Thursday, falling 25 basis points from 5% to 4.75%.
BoE Governor Andrew Bailey will deliver a major Mansion House speech on Thursday as traders look for guidance on monetary policy in the wake of the Labor government’s expansionary budget.
“Given that the UK economy has performed quite well and Donald Trump’s policies could prove inflationary, Bailey may not want to repeat his story that UK interest rates could be cut sooner than expected,” ING said.
Yuan drops after new debt package
rose 0.2% to 7.1934 and remained near a three-month high after China’s National People’s Congress outlined plans for more budget spending.
The NPC last week approved a 10 trillion ($1.4 trillion) debt package aimed at easing local governments’ debt burdens. But the measure disappointed investors who were hoping for more targeted fiscal measures.
rose 0.8% to 153.83, with the yen falling after the October Bank of Japan meeting showed policymakers were divided on more rate hikes, leading to more uncertainty about when the BOJ will raise rates further.
The uncertainty bodes ill for the yen, which has already been battered by increased political uncertainty in Japan after the country’s ruling Liberal Democratic Party lost its parliamentary majority last month.
