The euro and British pound hit multi-month lows against the U.S. dollar on Thursday as the new trading year began and investors prepared for Donald Trump's return to the White House this month.
The euro was down 0.42% against the greenback at $1.031 as of 2:40 p.m. in London (9:40 a.m. ET), hitting its weakest level since November 2022. Sterling fell nearly 1% to $1.239 , an eight-month low.
Optimism about the U.S. economy and stocks took center stage as markets reopened after trading disruptions over Christmas and New Year. Stock futures on Wall Street rose amid declines in Europe and Asia-Pacific US dollar index – a comparison with a basket of currencies – was 0.25% higher.
“Already [U.S.] “Growth has continued to beat forecasts as consumers and businesses shake off the impact of high interest rates and unemployment remains low,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said in a note on Thursday.
“Investors are confident that the story of 2025 will be a Goldilocks scenario, amid promises of lower taxes and deregulation under a second Trump presidency.”
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Euro/US Dollar
“The greenback continues to find support from expectations of bullish US dollar policy from Trump and fading confidence in the Fed's rate cut path for 2025,” said Mohamad Al-Saraf, foreign exchange and interest rate strategy officer at Danske Bank, in a note dated Thursday.
Key future data to assess the robustness of the US macro narrative includes Thursday's jobless claims and Friday's ISM manufacturing report, as well as next week's non-farm payrolls, Al-Saraf said.
He added that the euro would likely fall back to US dollar parity in the medium term, a benchmark it last reached in November 2022. However, Al-Saraf said the market could be pricing in rate cuts of less than two quarter points this year. Rates could prove overly restrictive and, along with any negative U.S. data surprises, could trigger a dollar correction.
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