The U.S. dollar falls in European markets on Thursday, losing a four-month high, due to corrections and profit-taking. This decline came as the rise in the yield on ten-year US Treasury bonds stalled. Markets were awaiting the Federal Reserve’s monetary policy meeting.
which is expected to see a new cut in US interest rates by about 25 basis points, the second rate cut in two consecutive meetings.
In terms of the dollar’s performance, the dollar index fell 0.45% to 104.70 points.
after reaching 105.25 points at its high. This decline followed strong gains by the dollar the previous day, rising 1.6% on positive expectations about Donald Trump’s victory in the US presidential election.
Trump is seen as supportive of a bullish outlook for the dollar due to his economic policies that are likely to include tax and tariff cuts.
which boosts optimism about economic growth in the states. United.
Despite the decline in the yield on the US 10-year bond by 0.9%, the markets remain waiting for the decisions of the Federal Reserve.
as it expects a rate cut at today’s meeting by 25 basis points, which will significantly affect the dollar levels in the markets.
The pricing of the odds of a rate cut at the current meeting reached 97.5%.
while the odds of a larger cut of about 50 basis points were estimated at 2.5%. Markets are also awaiting future Federal Reserve decisions.
with expectations pointing to the possibility of further rate cuts in December, by 67%.
Upcoming comments from Federal Reserve Chairman Jerome Powell could be crucial in determining the direction of the dollar.
as they are expected to provide more clues about future Fed policy.
Relationship between results of Trump’s election & dollar
The results of the US elections, especially in the event of Donald Trump’s victory, are factors that significantly affect the movement of financial markets, including the movements of the US dollar. After Trump’s election victory, the US dollar witnessed a significant appreciation against several major currencies.
due to several intertwined factors related to the economic policies that Trump intends to implement.
One of the main reasons for this effect is the economic outlook to which Trump’s victory is associated. He believes Trump’s economic policies will include tax cuts and increased government spending, measures that could support economic growth in the United States.
The protectionist policy Trump has been advocating, such as imposing tariffs on some products, could stimulate the U.S. economy at the expense of others, increasing demand for the dollar.
Moreover, Trump’s victory reinforces expectations of an increase in US economic growth.
as the economic policies he intends to implement are seen as potentially contributing to moving the US economy forward. Increased economic growth is usually positive for the local currency.
as demand for the US currency as a means of dealing in trade transactions rises.
and investors are expected to increase the purchase of assets denominated in USD.
The United States under Trump’s leadership was considered more oriented towards expansionary fiscal policies.
which is reflected in increased public spending and tax cuts.
which boosts demand for the dollar as a financing tool for these activities.
On the other hand, lower taxes could lead to higher economic inflation.
which could prompt the Federal Reserve to increase interest rates, which strengthens the US dollar.
Factors that contribute to volatility of US dollar
The fluctuation of the US dollar is a phenomenon that affects global financial markets and causes significant fluctuations in its value against other currencies. There are many factors that contribute to this volatility.
and they play an important role in determining the trends of the US currency in global markets.
One of the main factors affecting the volatility of the dollar is the monetary policy of the US Federal Reserve. The interest decisions made by the US central bank have a significant impact on the value of the dollar. When the Federal Reserve raises interest rates.
investors expect the return on dollar-denominated assets to be higher, boosting demand for the greenback.
In contrast, when the Federal Reserve decides to cut interest rates, it may reduce the attractiveness of the dollar for investors, causing decline in its value.
Another factor affecting the volatility of the US dollar is the US economic data. Reports on economic growth, such as GDP, employment, and inflation, significantly affect the value of the dollar.
For example, if economic data shows the strength of the US economy.
such as low unemployment or higher GDP growth, the dollar is likely to rise due to increased optimism about the US economy.
Conversely, if economic data shows weakness in the economy, it could lead to a weakening of the dollar. Geopolitical factors also significantly influence the volatility of the US dollar.
Global events such as trade wars, political crises, or international tensions can cause instability in financial markets, leading to fluctuations in the value of the dollar.
