He global dollar hit a new two-year high as momentum over potential donald trump and the pressure that these may generate in the flexibility of the monetary policy of the United States Federal Reserve (Fed) still stands; at the same time as the euro fell to a two-year low following unfavorable economic data.
He dollar index —which measures the performance of the greenback in relation to a basket of six other internationally relevant currencies— rose 0.41% to 107.50 units, its highest level since November 2022, in the early hours of Friday. The internal data added to the problems of the European currencies, which further pushed the US currency, already in an upward trend due to expectations that President-elect Trump’s policies could revive inflation and limit the capacity of the Fed to cut rates.
In that sense, Trump launched the idea of appointing Kevin Warsh as Secretary of the Treasury, with the understanding that he could later be president of the Federal Reserve, The Wall Street Journal reported Thursday, citing people familiar with the matter.
The preliminary Eurozone Composite Purchasing Managers’ Index of HCOB, compiled by S&P Global, fell to a 10-month low of 48.1 in November, below the 50 level that marks expansion from contraction, and the estimate of 50.0.
Furthermore, the PMI British fell to 49.9 in November, from 51.8 in October. The government’s plan to increase taxes to businesses contributed to the first contraction in private sector activity in more than a year, adding to recent signs that the economy was losing steam.
But in contrast, S&P Global said its preliminary U.S. composite PMI output index, which tracks the manufacturing and services sectors, rose to 55.3 this month, the highest level since April 2022, after a reading of 54.1 in October, with the services sector proving to be the bulk of the increase.
“This highlights the double dimension of the world: USA against the rest of the world, but even within the United States it is about services against manufacturing,” he said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, and then asking: “How long can American services offset the drag of everything else?”
The weakness of the euro
On the other hand, the euro fell to a two-year low and pound sterling also plummeted after data on Friday showed significant declines in commercial activity in both markets.
Thus, the common currency of the European bloc fell 0.54% to 1.0416 dollars, after falling to 1.0333 dollars, its lowest level since November 30, 2022, after the data, which showed that the service industry The bloc’s dominant economy had contracted and manufacturing had sunk deeper into recession.
Markets also increased their expectations of rate cuts by the European Central Bank (ECB)and see a more than 50% chance of a larger-than-usual 50 basis point reduction in borrowing costs in December. “Today’s numbers were weak enough to shift risks even further to the downside,” he told Reuters. Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.
“The monetary policy reaction should be simple: the ECB needs to ease faster to a neutral stance as a first step,” he added: “Then, of course, much will depend on US policies and tariffs, but under the assumption of a modest additional shock to trade and confidence, we believe the ECB will need to cut rates below 2% in 2025.”
In front of japanese yen, The dollar strengthened 0.12% to 154.69 yen. Last week, the yen had fallen below 156 per dollar for the first time since July, raising the possibility that Japanese authorities could again take steps to shore it up.
Source: Ambito
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