Investing.com – The U.S. dollar rose further on Thursday, climbing to a one-year high after consumer inflation data raised doubts about the size of the Fed’s rate cuts as Donald Trump began filling key positions in his new administration.
At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 106.807, its highest level since early November 2023.
Dollar continues to advance
U.S. data in October was largely in line with expectations, but headline CPI rates still rose from the previous month but remained well above the Fed’s annual target of 2%, according to data released Wednesday.
While the data fueled expectations that the Fed will still cut rates by 25 basis points in December, the long-term outlook for rates became more uncertain, helping the dollar.
This uncertainty about the Fed’s likely interest rate decisions has been heightened by Donald Trump’s victory in the US presidential election last week, with his likely policies of lower taxes and trade rates widely seen as inflationary.
Trump has continued to appoint loyalists to key positions, including Marco Rubio as secretary of state. It is widely believed that the senator from Florida is likely to take a tough stance on Iran and China.
“We think this week’s price action has given us a taste of what’s to come in the currency markets in this second Trump term, with short dollar corrections being used as an opportunity to enter structural USD longs at more attractive levels” ING analysts said. a note.
A speech from the Fed chairman later in the session is likely to give traders more clues about interest rates, in the wake of the central bank’s decision to cut rates by 25 basis points last week.
Euro rate lower
In Europe, the price traded 0.2% lower to 1.0538, at its lowest level in a year prior to the release of the latest eurozone figures.
Preliminary figures from October showed the bloc grew faster than market observers expected in the third quarter compared to the previous three months, but quarterly growth of 0.4% showed the eurozone economy remained vulnerable, with the largest component – the German economy – was particularly weak.
Germany’s Council of Economic Experts on Wednesday lowered its growth forecasts for Europe’s largest economy for 2024 and 2025, revising this year’s forecast to a 0.1% decline in gross domestic product from 0.2% growth , and the growth forecast for 2025 to 0.4%. , down from 0.9% growth.
The single currency is also grappling with political uncertainty in Germany, as well as the potential for tariffs against Europe from the new Trump administration.
“We believe that since November 5, we have entered a phase where a negative risk premium for the euro will become the new normal, given the risks to the eurozone related to Trump’s foreign/trade agenda,” ING said.
rose 0.3% to 1.2664 and fell to a three-month low at $1.2683, with the pound under pressure from the rampant dollar.
Rates were cut last week for the second time this year, but policymakers suggested further cuts could be postponed.
High inflation in Britain has not yet been overcome, she said in a speech on Wednesday, and inflation is more likely to exceed than undershoot the Bank of England’s medium-term expectations.
Mann voted against cutting borrowing costs at last week’s policy-setting meeting, the lone dissenter, and she also opposed a first rate cut in August.
The yen is approaching the intervention level
rose 0.4% to 156.00, with the pair at a more than three-month high and close to the level that last prompted government intervention in the foreign exchange market.
rose 0.3% to 7.2428 to a three-month high, with sentiment towards China weighed on by the prospect of high US trade tariffs against the country under the Trump administration.
fell 0.3% to 0.6466 to a three-month low after data showed Australian labor market growth cooled in October after six straight months of strong growth.
The governor of the Reserve Bank of Australia said interest rates were unlikely to rise further but would remain stable until the bank was confident inflation was easing further.
