The U.S. dollar is set for its third consecutive weekly gain, buoyed by strong U.S. economic data, a dovish European Central Bank (ECB), and rising speculation of a Donald Trump election win.
On Friday, the U.S. dollar continued its upward trend, marking a third straight weekly gain. The rally is being driven by robust U.S. economic data, combined with the ECB’s rate cuts and increasing expectations of Donald Trump’s potential return to the presidency, which investors believe could keep U.S. interest rates higher for longer.
Strong U.S. Data and ECB’s Rate Cuts Bolster Dollar
Recent data showed U.S. consumer spending exceeded expectations in September, adding to the sentiment that U.S. interest rates may not fall as rapidly as previously anticipated. This comes in stark contrast to the ECB’s decision to cut rates by a quarter point on Thursday, reflecting the worsening economic outlook across the eurozone.
The euro has been under pressure, plunging nearly 3% in the past three weeks and trading at its lowest levels since August. Traders are now factoring in further ECB rate cuts in upcoming meetings as inflation remains high and growth falters. According to market strategist Fiona Cincotta, “There is potential for further decline in the euro,” predicting it could drop to $1.08 in the near term.
The euro was last trading at $1.0848, up 0.16% on Friday but has fallen in 14 out of the last 16 sessions.
China’s Economic Stimulus Measures Fall Short
Meanwhile, China’s economic stimulus measures have failed to impress markets. The Chinese yuan is on track for its largest weekly decline in over 13 months against the dollar. Investors were underwhelmed by the lack of new details from Chinese authorities on their plans to revive the economy.
However, some optimism returned after the People’s Bank of China (PBOC) launched the Securities, Fund, and Insurance Swap Facility (SFISF) on Friday, signaling potential for further monetary easing. This came after better-than-expected third-quarter growth figures from China, although property investment remained weak, falling over 10% in the first nine months of the year.
The offshore yuan edged up slightly, last trading at 7.1190 against the dollar. The Australian dollar, often used as a proxy for the yuan, also gained 0.26% to reach $0.6713.
Trump’s Potential Victory Fuels Dollar Strength
Speculation around Donald Trump’s possible election victory in November has further fueled the dollar’s rise. Investors expect his administration to pursue tariff and tax policies that could sustain higher U.S. interest rates, adding to the dollar’s appeal.
The yen was last trading at 150.00 to the dollar, down 0.14%, after briefly breaking above this level for the first time since August. Meanwhile, the British pound rose 0.27% to $1.3045, helped by stronger-than-expected UK retail sales data for September.
Bitcoin Benefits from Trump’s Prospects
Bitcoin has also seen a significant boost from Trump’s prospects. His administration is perceived as taking a softer stance on cryptocurrency regulation, pushing Bitcoin prices up over 10% since October 10. It was last trading at $67,826.
