Investing.com – The U.S. dollar rose on Friday, heading for its best week in a month as investors tempered expectations for aggressive U.S. policy easing next year, while frail growth data weighed on sterling.
At 05:00 ET (10:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 106,780, heading for a weekly gain of about 1%, after previously rising to 106,780. highest level in over 2 weeks.
Dollar wanted
This followed the release of higher-than-expected headline figures for the United States, heightening concerns that prices will remain flat in the novel year as novel President Donald Trump threatens trade and tax policies that could prove inflationary.
The idea of a more cautious approach to Fed easing in 2025 contrasts with the likely moves of the U.S. central bank’s main competitors following a series of rate cuts over the past few days, with excessive 50-basis-point moves in Switzerland and Canada and 25-basis-point rate cuts by the European Central Bank.
“Despite seasonal trends towards a weaker dollar, the dollar is actually holding its gains quite well,” ING analysts said in a note. “This is because anticipation of Trump’s policy agenda keeps dollar spreads wide and pressure on the currencies of trading partners. It is difficult to imagine this state of affairs changing before Trump’s inauguration in January.”
Sterling falls after GDP disappointment
In Europe, it rose 0.1% to 1.0473, after falling sharply after the European Central Bank’s policy meeting on Thursday.
Interest rate cut by 25 basis points, in line with expectations, but regional economic weakness suggests that further interest rate cuts are likely in the novel year, as confirmed by ECB policymaker and head of the Bank of France Francois Villeroy de Galhau.
“There will be further interest rate cuts next year,” Villeroy told BFM business radio.
“There are no commitments regarding the interest rate trajectory… I note that collectively we are rather satisfied with the financial markets’ forecasts for interest rates for next year,” he added.
“The direction of rate changes in the euro zone is lower and rates will not necessarily stay at the neutral level (2.00/0.2.25%),” ING added.
fell 0.3% to 1.2633 after data showed the British economy contracted again in October and economic activity in the world’s sixth-largest economy remained very frail.
It contracted by 0.1% in October, similar to the previous month, giving an annual growth rate of 1.3%.
This result was much weaker than expected, as GDP was expected to grow by 0.1% in October, representing an annual augment of 1.6%.
BOJ meeting in the spotlight
In Asia, it rose 0.3% to 7.2878, hovering near a two-year high, after China’s two-day Central Economic Work Conference ended on Thursday, leaving markets disappointed by the lack of aggressive stimulus measures.
gained 0.6% to 153.50 after media reports indicated that it would probably leave interest rates unchanged next week, contrary to earlier expectations of a hike.
