EURUSD sees substantial offers near 1.0800 as the US dollar starts its upward trajectory.
During European trading hours on Friday, the EURUSD is under selling pressure approaching the critical resistance of 1.0800. The major currency pair fails to prolong Thursday’s recovery, as the US Dollar (USD) resumes its upward trend following a strong fall.
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has recovered to roughly 104.65.
Trump’s triumph boosted the US dollar’s long-term prospects.
On Thursday, the index retraced to almost 104.20 from its more than four-month peak Following Donald Trump’s victory in the presidential election in the United States, 105.50 people registered.
The US Dollar’s recovery can be traced to Trump’s victory, as he promised to hike import tariffs by 10% and decrease corporate taxes throughout his campaign. Market experts believe that if Trump’s fiscal policy is implemented, it will result in increased investment, consumption, and labor demand, raising inflationary risks and forcing the Federal Reserve (Fed) to adopt a more restrictive monetary policy posture.
Fed Chair Jerome Powell said on Thursday that he does not expect any immediate impact of Trump’s return to the White House on the central bank’s policies.
Fed Chair Jerome Powell said on Thursday that he does not expect any immediate impact of Trump’s return to the White House on the central bank’s policies. “We do not conjecture, speculate, or make assumptions about future government policy choices will be,” Powell said after the bank opted to lower interest rates by 25 basis points (bps) to 4.50%-4.75%, as predicted.
When asked about the future path of interest rates, Powell sounded confident about the continuation of the policy-easing cycle, saying he expects inflation to continue on pace to meet the bank’s target of 2% despite some softening in labor market conditions.
Daily Market movers: EURUSD falls as US dollar recovers
EURUSD is also under heavy selling pressure due to the Euro’s (EUR) underperformance against its major rivals, with the exception of Asia-Pacific currencies. The Euro is down as investors are anxious about the Eurozone’s economic prospects due to Trump’s victory, the breakdown of Germany’s three-party coalition, and increased fears that inflation would remain below the European Central Bank’s (ECB) target of 2%. Higher tariffs by the US would strain the Eurozone’s export sector, likely hitting economic growth. “Uncertainty is high on many levels, from the exact impact of US tariffs to the timing of their implementation to how and when Europe responds,” Deutsche Bank analysts said. Meanwhile, the Deutsche Bank also sees the ECB’s Deposit Facility rate heading to 1.5%, down from the 2.25% previously projected, due to weakening macroeconomic conditions and inflation risks falling below target.
The collapse of the German coalition after Chancellor Olaf Scholz dismissed Federal Minister of Finance Christian Lindner has paved the way for snap elections in early 2025.
The collapse of the German coalition after Chancellor Olaf Scholz dismissed Federal Minister of Finance Christian Lindner has paved the way for snap elections in early 2025. The scenario of political uncertainty limits the growth potential of an economy due to the postponement Fiscal spending by the government.
