The euro and pound hit multi-month lows against the US dollar on Thursday, as the new trading year kicked off and investors braced for Donald Trump's return to the White House this month.
The euro fell 0.33% against the dollar at $1.032 just before 1 p.m. in London, recording its weakest level since November 2022. The pound sterling fell 0.78% to $1.242, the lowest level in eight months.
Optimism about the US economy and stocks was in focus as markets reopened after trade disruptions over Christmas and New Year. Stock futures on Wall Street It was highest amid declines in Europe and Asia Pacific as US dollar index – Compared to a basket of currencies – rose by 0.25%.
“(US) growth has already remained ahead of expectations, as consumers and businesses shrug off the impact of higher interest rates, with the unemployment rate remaining low,” Susannah Streeter, head of money and markets at Hargreaves Lansdowne, said in a note on Thursday.
Investors are hoping that a moderate scenario will be the story of 2025, amid promises of tax cuts and deregulation under Trump's second presidency.
EUR/USD
“The dollar continues to find support from Trump’s bullish policy outlook for the dollar and fading conviction about the Fed’s 2025 rate cut path,” Mohamed Al-Sarraf, associate FX and interest rate strategy at Danske Bank, said in a note on Thursday.
Al-Sarraf said that key upcoming data in assessing the strength of the US macroeconomics includes unemployment claims on Thursday and the ISM manufacturing report on Friday, along with next week's non-farm payrolls report.
He added that the euro was likely to fall back to parity with the US dollar in the medium term, a benchmark it last reached in November 2022. However, Sarraf said market pricing in interest rate cuts of less than a quarter point this year may prove overly hawkish and may Leading to a correction in the dollar along with any negative US data surprises.
