By Amanda Cooper
LONDON (Reuters) – The dollar held near four-month highs on Thursday, posting its biggest one-day gain in two years after Donald Trump won the U.S. presidential election and as investors prepared for the Federal Reserve’s upcoming rate decision. percentages.
The pound sterling strengthened after the Bank of England cut interest rates, but it said it expected inflation and economic growth in the UK to accelerate faster than previously expected.
But the main topic was the dollar, which rose as much as 2% against a basket of currencies on Wednesday as investors began stockpiling U.S. assets they believe will benefit from Trump’s proposed tariffs and tax policies.
Trump’s victory is unlikely to make an immediate difference to the Fed, which is expected to cut interest rates by 25 basis points later in the day. Investors will therefore begin to pay attention to who Trump’s key nominees may be and whether his Republican Party will win both houses of Congress in the “red elections”, which may determine the ease of implementing some of his proposals.
“If so, we will probably come to the conclusion together in the market that he will be able to implement his fiscal program to a greater extent. And this could support the dollar,” said Jane Foley, currency strategy specialist at Rabobank.
“There’s going to be a lot of back-and-forth to figure out exactly what the impact is going to be on inflation and, therefore, how will the Fed respond? But overall, I think all of this will definitely be dollar positive by 2025,” she said.
More immediately, investors will want the Fed to indicate what to expect in December and beyond, especially after last week’s October jobs report, which was well below expectations in gigantic part because of disruptions from recent hurricanes and worker strikes.
Trump’s victory also fueled speculation that the Fed may cut interest rates at a slower and shallower pace because its policies of curbing illegal immigration and imposing modern tariffs could raise inflation.
According to CME Group’s (NASDAQ:) Fed Watch Tool, markets now see about a 67% chance that the Fed will also cut interest rates next month, down from 77% on Tuesday.
The index, which measures the U.S. currency against six others, fell 0.3% to 104.84 after hitting its highest level since July 3 on Wednesday, when it posted its biggest one-day gain since September 2022, an raise of 1.5%.
THE EURO SHOWS THE FALL OF THE GERMAN GOVERNMENT
Sterling edged closer to session highs after the BoE cut interest rates in line with forecasts, but it suggested future rate cuts may only be gradual given an expected raise in economic growth and inflation from last week’s Budget by Finance Minister Rachel Reeves.
The pound was last up 0.4% on the day at $1.29365.
The euro rose 0.3% to $1.0764, after falling to $1.06828 for the first time since July 27 on Wednesday.
The single European currency has downplayed the political crisis in Germany, where the already awkward coalition led by Chancellor Olaf Scholz collapsed slow on Wednesday evening.
Sweden’s Riksbank cut interest rates by half a point as expected, leaving the krona up 0.2% against the euro at 11.618, while Norges Bank left Norwegian interest rates unchanged, pushing the krone up 1% in relation to the euro.
The yen hit a three-month low against the dollar at 154.715. Japan’s top currency diplomat Atsushi Mimura signaled officials’ willingness to act, in the government’s strongest warning to speculators in recent months.
The Japanese currency was last up 0.45% at 153.92.
The yuan rose 0.5% after Chinese exports beat forecasts, previously hitting their lowest level in almost three months.
was quoted at 7.1677 yuan per dollar.
fell 1.32% to $74,663, hitting a record high of $76,499.99 on Wednesday. rose 4.5% to $2,811, the highest level since early August.
