Authors: Chibuike Oguh and Amanda Cooper
NEW YORK/LONDON (Reuters) – The U.S. dollar posted its biggest weekly gain in more than a month on Friday as markets reassessed expectations for future interest rate cuts and given that President-elect Donald Trump’s policies may be inflationary.
The dollar benefited from market expectations that Trump administration policies, including tariffs and tax cuts, could trigger inflation, leaving the Federal Reserve less room to cut interest rates.
Fed Chair Jerome Powell said Thursday that the U.S. central bank does not need to rush to cut interest rates, prompting traders to scale back more aggressive bets on a rate cut next month and beyond.
The dollar was set to post a weekly gain against the Japanese yen after climbing above 156 yen this week for the first time since July. It recently fell 1.4% to 154.145 per dollar.
The euro headed for losses for a second straight week after falling to its lowest level since October 2023. It last rose to $1.054025.
“Today is more about the Fed than anything else, and I’m a little surprised that the euro is a bit stronger in the face of Powell’s more hawkish comments,” said Thierry Albert Wizman, global currency and interest rate strategist at Macquarie in New York.
“People may be thinking that next year will be a little more chaotic given some doubts surrounding U.S. government nominations. So I understand why people are losing a little bit of faith in Trump’s trade and the story of American exceptionalism in general.”
Friday’s Commerce Department data showed U.S. retail sales rose slightly more than expected in October, but consumer spending growth appeared to sluggish at the start of the fourth quarter.
Boston Fed President Susan Collins, in comments published Friday in the Wall Street Journal, also said interest rate cuts could be paused after the Dec. 17-18 meeting, depending on upcoming employment and inflation data. . According to CME’s FedWatch tool, the probability of a December cut has dropped to about 61% from nearly 82% the day before.
Sterling was on track for its biggest weekly decline since January 2023, down around 2.4%. It was last down 0.38% at $1.2620. The pound reacted poorly to data showing the British economy unexpectedly contracted in September, and economic growth slowed to a crawl in the third quarter.
It is trading at a year-high against the basket of currencies at 107.07, after rising almost 1.65% this week, the best result since September. It recently fell 0.19% to 106.68.
In cryptocurrencies, bitcoin was trading around $90,000 as some investors took profits after a stellar run. gained 2.64% to $90,545.00. fell 2.17% to $3,051.30.
“Today is really about consolidation before the weekend; we haven’t set any key levels like 106 in euros or 127 in sterling,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Yesterday the market overreacted to Powell, but US interest rates are still unchanged. So whatever forces have been unleashed by the US election have not yet been exhausted.”
