Investing.com – The U.S. dollar rose on Thursday, the first day of 2025, on hopes that U.S. economic growth will outperform other markets, a more hawkish Fed stance and expectations for the future administration of Donald Trump.

At 12:30 ET (5:30 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was up 0.8% at 109,170.

The dollar will remain in demand in 2025

The index rose 7% in 2024 as investors sharply lowered expectations for Fed rate cuts following policymakers’ projections after its December policy meeting.

At its last policy meeting this year, the U.S. central bank predicted just two 25-basis-point interest rate cuts in 2025, a edged cut from the four cuts it announced in September.

In fact, markets are currently pricing in only 42 basis points of cuts from the US central bank in 2025, and Donald Trump’s return to the White House increases the degree of uncertainty given his policies of looser regulation, tax cuts, tariff increases and tighter immigration is perceived as a pro-growth and inflationary factor.

Attention is focused on the release of weekly data later in the session and the December issue, which may provide clues about the strength of the U.S. economy.

In Europe, shares fell 0.9% to 1.0258, after falling more than 6% in 2024.

Data released earlier on Thursday showed manufacturing activity in the euro zone falling at a faster pace towards the end of the year, giving little signs of an imminent recovery.

S&P Global’s final HCOB index fell to 45.1 in December amid a broad-based economic downturn as the bloc’s three largest economies – Germany, France and Italy – remain stuck in an industrial recession.

Traders expected further interest rate cuts from the European Central Bank in 2025, with markets pricing the easing at 113 basis points, significantly more than the Federal Reserve.

This divergence in Fed and ECB policy “will result in euro parity with the dollar within 2025.” – ABN Amro analysts said in a note.

It traded 1.2% lower at 1.2366, contributing to a 1.7% decline last year, but was nonetheless the best-performing G10 currency against the dollar.

According to mortgage lender Nationwide, the UK rose in December, jumping 0.7% month-on-month in December, after rising 1.2% in November.

The resilience of the UK housing market has surprised many people given signs of weakening activity across the economy – year-end prices were 4.7% higher than December 2023 levels, compared with 3.7% in November – the highest annual growth rate from the end of 2022 .

Interest rates kept unchanged last month after consumer prices rose above target, and this central bank is likely to remain more cautious than its eurozone counterpart in 2025.

Slowing growth of Chinese industry

In Asia, it rose 0.6% to 7.3435, hitting its highest level in more than a year after data showed the country’s manufacturing sector growth in December was smaller than expected.

The reading came just days after government PMI data also showed weaker-than-expected growth in the manufacturing sector.

The reprints have raised concerns about a slowdown in China’s economic recovery, with recent stimulus measures providing only constrained support.

was trading 0.35% higher at 157.79, with the Bank of Japan’s mostly dovish outlook for 2025.