The euro and the British pound hit multi-month lows against the US dollar on Thursday, as the new trading year kicks off and investors brace for Donald Trump’s return to the White House this month.
The euro was 0.33% lower against the US currency at $1.032 shortly before 1pm in London, hitting its weakest level since November 2022, while the pound fell 0.78% to $1.242, an eight-month low.
Optimism around the US economy and stocks was in focus as markets reopened after trading disruptions over Christmas and the New Year. Stock futures on Wall Street were higher in the middle of falling into Europe and Asia-Pacific while it is US dollar index — comparison with a basket of currencies — marked 0.25% more.
“Already [U.S.] growth continued to beat forecasts as consumers and businesses shrugged off the impact of high interest rates and the unemployment rate remained low,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said in a note on Thursday.
“Investors are hoping the 2025 scenario will be a golden story, amid promises of lower taxes and deregulation under a second Trump presidency.”
euro/US dollar
“The greenback continues to find support in expectations of Trump’s bullish USD policy and fading confidence around the Fed’s 2025 rate cut path,” said Mohamad Al-Saraf, FX and rates strategy associate at Danske Bank, in a note from Thursday.
Key data to come in 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 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. However, Al-Saraf said market prices for less than two quarter rate cuts this year could show are overly hawkish and could trigger a dollar correction along with negative US data surprises.
