Dollar slips to one-week low as 'Trump trade' momentum slows
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The U.S. dollar weakened on Wednesday, slipping to a one-week low against major peers, as the momentum from the post-election rally driven by Donald Trump's victory began to cool. The dollar index (DXY), which tracks the greenback against six major currencies, fell to 106.07 before recovering slightly to 106.27.
The dip follows three consecutive days of losses from the one-year high of 107.07 reached last Thursday. The earlier rally was fueled by expectations of fiscal spending, tariff increases, and stricter immigration policies under the incoming administration—policies projected to spur inflation and temper Federal Reserve easing.
Investor sentiment shifted following geopolitical developments, including comments from Russia's foreign minister signaling efforts to avoid nuclear conflict. Moscow’s announcement of a lower threshold for nuclear strikes had initially provided a brief boost to safe-haven assets like the dollar and yen, but the impact faded quickly.
Bitcoin rose 0.4%, trading at $92,593 after reaching a record high of $94,078.22 on Tuesday. Optimism about a pro-crypto regulatory environment under Trump continues to support the cryptocurrency, further buoyed by reports of Trump's social media company exploring an acquisition of Bakkt, a crypto trading firm.
The yen softened, with the dollar gaining 0.39% to 154.84 yen (USD/JPY), recovering from Tuesday’s low of 153.28. The rebound was driven by rising U.S. Treasury yields, reflecting tempered expectations for a December rate cut.
Sterling held steady at $1.2685 (GBP/USD), awaiting the release of the UK’s inflation data later in the day. Bank of England Governor Andrew Bailey signaled a cautious approach to easing during parliamentary testimony on Tuesday.
The euro slipped 0.12% to $1.0585 (EUR/USD), recovering from a dip to $1.0524 in the previous session. Traders are watching for signs of stability as the European Central Bank evaluates inflation data for further policy direction.
Traders have adjusted their expectations for the Federal Reserve’s December meeting. The likelihood of a rate cut has dropped to 58.9% from 82.5% a week ago, according to the CME’s FedWatch Tool. Federal Reserve Chair Jerome Powell’s recent comments, highlighting strong economic performance and moderate inflationary pressures, reinforce the prospect of a slower easing cycle.
Despite short-term challenges, the dollar’s long-term outlook remains supported by firm economic data. Analysts expect that fiscal policies under the Trump administration and resilient U.S. growth will likely sustain the greenback’s strength over the coming months.
The dip follows three consecutive days of losses from the one-year high of 107.07 reached last Thursday. The earlier rally was fueled by expectations of fiscal spending, tariff increases, and stricter immigration policies under the incoming administration—policies projected to spur inflation and temper Federal Reserve easing.
Investor sentiment shifted following geopolitical developments, including comments from Russia's foreign minister signaling efforts to avoid nuclear conflict. Moscow’s announcement of a lower threshold for nuclear strikes had initially provided a brief boost to safe-haven assets like the dollar and yen, but the impact faded quickly.
Bitcoin rose 0.4%, trading at $92,593 after reaching a record high of $94,078.22 on Tuesday. Optimism about a pro-crypto regulatory environment under Trump continues to support the cryptocurrency, further buoyed by reports of Trump's social media company exploring an acquisition of Bakkt, a crypto trading firm.
The yen softened, with the dollar gaining 0.39% to 154.84 yen (USD/JPY), recovering from Tuesday’s low of 153.28. The rebound was driven by rising U.S. Treasury yields, reflecting tempered expectations for a December rate cut.
Sterling held steady at $1.2685 (GBP/USD), awaiting the release of the UK’s inflation data later in the day. Bank of England Governor Andrew Bailey signaled a cautious approach to easing during parliamentary testimony on Tuesday.
The euro slipped 0.12% to $1.0585 (EUR/USD), recovering from a dip to $1.0524 in the previous session. Traders are watching for signs of stability as the European Central Bank evaluates inflation data for further policy direction.
Traders have adjusted their expectations for the Federal Reserve’s December meeting. The likelihood of a rate cut has dropped to 58.9% from 82.5% a week ago, according to the CME’s FedWatch Tool. Federal Reserve Chair Jerome Powell’s recent comments, highlighting strong economic performance and moderate inflationary pressures, reinforce the prospect of a slower easing cycle.
Despite short-term challenges, the dollar’s long-term outlook remains supported by firm economic data. Analysts expect that fiscal policies under the Trump administration and resilient U.S. growth will likely sustain the greenback’s strength over the coming months.