The U.S. dollar gained ground on Monday, maintaining its upward trend as confidence in former President Donald Trump’s prospects in the upcoming U.S. election grows.
As of 04:30 ET (08:30 GMT), the Dollar Index, which measures the dollar’s performance against six major currencies, climbed 0.2% to 103.462, following a 0.6% increase last week.
Dollar Boosted by Trump Election Optimism
The dollar has been hovering near its highest levels in over two months, bolstered by expectations that U.S. interest rates will decrease more slowly than previously anticipated. This view is reinforced by recent data showing the U.S. economy remains relatively strong.
According to the CME FedWatch tool, traders are largely expecting a 25 basis point rate cut by the Federal Reserve in November.
The dollar’s strength has also been fueled by rising confidence in Donald Trump’s potential victory over Kamala Harris in the 2024 presidential election, which is less than two weeks away. Analysts suggest that Trump’s proposed tariffs and tax policies could keep U.S. interest rates elevated and weaken the currencies of U.S. trading partners.
“Currency markets appear to be positioning for a Trump win in the upcoming election. October has been a favorable month for Trump in the polls, and the dollar is strong across the board,” ING analysts commented in a recent report.
Euro Weakens on Disappointing German Data
In Europe, the euro slipped slightly, with EUR/USD down 0.1% to 1.0850 after Germany’s producer prices fell more than expected in September. The prices declined by 1.4% year on year, exceeding the anticipated drop of 1.0%.
The European Central Bank (ECB) is expected to cut its key interest rate to a “natural” range of 2%-3%, but it may consider deeper cuts if inflation continues to decline, according to ECB policymaker Gediminas Simkus. Simkus indicated that if disinflation persists, rates might drop below the natural level.
British Pound Dips on Housing and Inflation Concerns
The British pound also fell, with GBP/USD down 0.2% to 1.3022, as data revealed that home prices in the UK increased by just 0.3% in October significantly below the typical monthly rise of 1.3%. This slowdown, coupled with a surprise decline in services inflation, suggests that the Bank of England may implement back to back rate cuts in the near future to support the sluggish economy.
Yuan Slides After PBOC Rate Cut
The Chinese yuan weakened, with USD/CNY rising 0.2% to 7.1120, following a 25 basis point cut to China’s benchmark loan prime rate by the People’s Bank of China (PBOC). The rate cut is part of a series of recent stimulus efforts by Beijing aimed at boosting the country’s slow economic growth.
Yen Slips, but Holds Below Key Level
Meanwhile, the Japanese yen edged lower, with USD/JPY increasing by 0.3% to 149.91, though it remained below the 150 level after briefly surpassing it last week for the first time since early August.
