The global dollar reached maximums of two and a half months in the run-up to key days for the United States

The global dollar reached maximums of two and a half months in the run-up to key days for the United States

He global dollar rose to a new two-and-a-half-month high on Tuesday, continuing its recent rise on expectations that the United States Federal Reserve (Fed) moderate your cutting path interest rates, as investors positioned themselves ahead of a seemingly close US presidential election.

He dollar index —which measures the performance of the greenback relative to a basket of six other internationally relevant currencies— rose 0.12% to 104.08, after having touched 104.10, its highest level since August 2. Thus, it increased around 3.3% in the month, on track for its strongest month since April 2022.

Meanwhile, the euro fell 0.15% to $1.0798, after a number of US monetary policy makers European Central Bank spoke to warn of the risk of inflation falling below the central bank’s 2% target, signaling a shift in its approach after years of excessive price growth.

In front of japanese yen, The dollar strengthened 0.17% to 151.08 after rising to 151.19, its highest level since July 31, while the pound sterling fell 0.04% to $1.2979.

The expectation about the Fed and the elections in the United States

Dollar strength, driven by rising bond yields 10-year Treasury bonds —which increased 3 basis points in the operations of London to a new 12-week high as investors priced in a more robust U.S. economy—kept pressure on the yen, euro and sterling, a theme that has been building in recent weeks as traders They reduce their bets on rapid rate cuts in the United States.

Some analysts argued that the publication of the Beige Book Late Wednesday could be the biggest threat to the dollar this week, with some seeing the earlier summary of economic conditions as the main driver of lower expectations following the 50 basis point interest rate cut in September. , which began the cycle of flexibility of the Fed.

In that sense, the markets are pricing in a probability of 89.6% that the Federal Reserve cut rates by 25bp next month, down from a 50% chance a month earlier, when investors saw the same chance of a larger 50bp cut, the tool showed CME FedWatch. Operators anticipate another 40 points of general flexibility during the rest of the year.

However, the elections Americans remain the main focus, with markets expecting the dollar’s strongest response to a Republican sweep, which should open the door to further increases in trade tariffs in combination with fiscal stimulus. Instead, a minor rally in the currency is seen in response to a divided Republican government outcome, while a Democratic sweep or divided Democratic government would likely result in some initial disadvantage.

With only two weeks left before the elections, the increasing chances that the former president donald trump win are boosting the dollar, as their policies tariffs and taxes proposals will likely keep US interest rates high. “Even small changes in polls could lead to seemingly erratic swings in market sentiment,” he told Reuters. Antti Ilvonen, currency analyst Danske Bank.

Source: Ambito

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