Euro, British pound fall against US dollar as markets brace for Trump

The euro and British pound hit multi-month lows against the U.S. dollar on Thursday as a new trading year began and investors braced for Donald Trump’s return to the White House this month.

The euro fell 0.33% to $1,032 against the dollar by 1:00 p.m. in London, its weakest level since November 2022. Sterling fell 0.78% to $1,242, an eight-month low.

Optimism around the U.S. economy and stocks were in focus as markets reopened after a Christmas and New Year’s Eve trading halt. Wall Street stock futures was higher against the background of the decrease Europe and Asia-Pacific as US dollar index — compared with a basket of currencies — rose 0.25%.

“Already (US) growth continues to beat forecasts as consumers and businesses shrug off the impact of high interest rates and unemployment remains low,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said in a note on Thursday.

“Investors expect the story of 2025 to be a gold-lock scenario amid promises of tax cuts and deregulation during Trump’s second presidency.”

“The dollar continues to find support from rising expectations of Trump policies and confidence in the Fed’s rate cut trajectory for 2025,” Mohamad Al-Saraf, FX and rates strategist at Danske Bank, said in a note on Thursday.

Key data ahead to gauge the strength of the US macro narrative include Thursday’s jobless claims and Friday’s ISM manufacturing report and next week’s non-farm payrolls, Al-Saraf said.

He added that the euro is likely to fall back to parity with the US dollar in the medium term, a level it last hit in November 2022. However, Al-Saraf said market prices are proving too hawkish for less than a two-quarter point discount this year, and any negative US data surprises could lead to a dollar correction.