Euro, British pound fall against U.S. dollar as markets brace for Trump

The euro and British pound hit multi-month lows against the US dollar on Thursday, as the new trading year got underway and investors braced for Donald Trump’s return to the White House this month .

The euro was 0.33% lower against the greenback at $1,032 just before 1pm in London, hitting its weakest level since November 2022. Sterling fell 0.78% to $1,242, an eight-month low.

Optimism around the economy and US stocks was in focus as markets reopened after trading disrupted over Christmas and the New Year. Wall Street Stock Futures were higher amid declines in Europe and the Asia-Pacific like the US dollar index – a comparison against a basket of coins – ticked 0.25% higher.

“Already [U.S.] Growth continued to beat forecasts as consumers and businesses weathered the impact of high interest rates, with the unemployment rate remaining low,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown, in a statement Thursday.

“Investors hope a gold rush scenario will be the story of 2025, amid promises of lower taxes and deregulation under a second Trump presidency.”

“The greenback continues to find support from expectations of Trump’s bullish USD policies and fading conviction around the Fed’s rate cut trajectory for 2025,” said Mohamad Al-Saraf, FX and associate at rate strategy in Danske Bank, in a note on Thursday.

Key data ahead for assessing the strength of the US macro narrative include Thursday’s jobless claims and Friday’s ISM manufacturing report, along with next week’s non-farm payrolls, Al-Saraf he said.

He added that the euro was likely to return to parity with the US dollar in the medium term, a benchmark that last occurred in November 2022. However, Al-Saraf said that market prices for less than two quarter point tax cuts this year can be. prove overly hawkish and could trigger a dollar correction with any negative US data surprise.