The euro and British pound hit their lowest levels against the US dollar on Thursday as the new trading year began and investors prepared for Donald Trump's return to the White House later this month.
The euro fell 0.33% against the dollar at $1.032 shortly before 1pm in London, hitting its weakest level since November 2022. The pound sterling fell 0.78% to $1.242, an eight-year low months.
Optimism around the US economy and stocks was in focus as markets reopened following trade disruptions over Christmas and New Year's Day. Wall Street Stock Futures were higher in the face of declines Europe and Asia and the Pacific as US Dollar Index — comparison to the basket of currencies — increased by 0.25%.
“Growth already (in the U.S.) continues to outpace forecasts as consumers and businesses shrug off the impact of high interest rates and the unemployment rate remains low,” Susannah Streeter, director of money and markets at Hargreaves Lansdown, said in a note Thursday.
“Investors hope the Goldilocks scenario will be the story of 2025, amid promises of lower taxes and deregulation under Trump's second presidency.”
Euro/US dollar
“The dollar continues to find support in the form of expectations regarding Trump's policies aimed at increasing the dollar and weakening confidence in the trajectory of Fed interest rate cuts in 2025,” said Mohamad Al-Saraf, a specialist in currency and rates strategy, in a note on Thursday. interest rates in Danske Bank.
Key data needed to assess the robustness of the U.S. macroeconomic narrative include Thursday's jobless claims data and Friday's ISM manufacturing report, as well as next week's non-farm payrolls data, Al-Saraf said.
He added that in the medium term, the euro is likely to return to US dollar parity, a benchmark last reached in November 2022. Al-Saraf, however, said the market was pricing in less than two quarter-point interest rate cuts this year. turn out to be too hawkish and may trigger a correction of the dollar along with the surprise of negative data from the US.