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The euro and British pound hit multi-month lows against the U.S. dollar on Thursday as the new trading year kicked off and investors braced for Donald Trump’s return to the White House this month.
At 2:40 p.m. in London (9:40 a.m. ET), the euro was down 0.42% against the dollar at $1.031, its lowest level since November 2022. Sterling fell nearly 1% to $1.239, an eight-month low.
Optimism around the US economy and stocks were in focus as markets reopened after a trading disruption over Christmas and the New Year. Wall Street stocks opened higher amid the fall Europe and Asia-Pacific region how US dollar index — compared to the basket of currencies — increased by 0.36%.
“(U.S.) growth continued to beat forecasts as consumers and businesses shrugged off the impact of high interest rates and unemployment remained low,” Suzanne Streeter, head of money and markets at Hargreaves Lansdown, said in a note on Thursday.
“Investors are hoping for a blizzard scenario in 2025 amid promises of tax cuts and deregulation in Trump’s second presidency.”
Euro/US dollar
“The greenback continues to find support on expectations of Trump’s bullish dollar policy and fading confidence in the Fed’s rate cut trajectory through 2025,” Mohammad Al-Saraf, currency and rates strategist at Danske Bank, said in a note on Thursday.
Key data to gauge the reliability of the US macro narrative include 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 is likely to return to parity with the US dollar in the medium term, a benchmark it last reached in November 2022. Al-Saraf said, however, that the market is pricing in less than two quarter-point rate cuts this year may prove too hawkish and, along with any negative US data, surprises could trigger a dollar correction.
