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The dollar steadied today at 105.06, just shy of its recent peak of 105.44, buoyed by post-election momentum following Donald Trump’s return to the White House.
See: The USDX 4-hour chart shows a strong upward trend with the dollar rising to a high of 105.15, supported by bullish signals from the MA and MACD. Download the VT Markets app now.
Traders are preparing for a highly anticipated 25-basis-point rate cut from the Federal Reserve today, yet markets remain cautious as focus turns to any signals from the Fed that could suggest a pause in rate cuts for December.
Adding to this uncertainty, last week’s weaker-than-expected October jobs report casts doubt on the strength of the U.S. labour market, though analysts note that the effects of hurricanes and strikes may have skewed the data.
See also: USDX Hits Four-Year High as Trump Re-Elected
As U.S. Treasury yields surged to multi-month highs on Wednesday, market participants see the Fed’s decision as a critical factor in the dollar’s trajectory. This stronger yield environment, alongside Trump’s pro-business policies, suggests that the Fed could lean towards a more conservative path in rate cuts.
Trump’s policies—including tighter immigration, tariffs, tax cuts, and deregulation—could stimulate growth and inflation, ultimately restricting the Fed’s ability to lower rates. With a Republican-led Senate, market participants are bracing for larger legislative shifts that could lead to wider currency movements.
U.S. equities are at record highs, supported by a weaker yen, which analysts view as a vote of confidence in Trump’s policies. The yen traded at 154.30 per dollar, recovering from Wednesday’s low of 154.7.
Meanwhile, the euro has stabilised at $1.0731, after hitting a low of $1.0683, a level not seen since late July. Sterling holds steady at $1.2885, as traders await direction from the Bank of England, which is expected to cut rates for the second time since 2020, yet the BOE’s guidance on inflation-targeting moves will be of keen interest following the government’s inflation-driven budget.
The CME Group’s Fed Watch Tool now shows a reduced probability of a December rate cut, standing at 70%, down from 77% earlier this week.
As a result, any move from the Fed today that appears less accommodative could prompt the dollar to regain its momentum, pressuring other global currencies and potentially setting the stage for market shifts across the equity and bond markets.
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