The dollar started the year without losing its momentum, still driven by the shift in economic and monetary trajectories between the United States and most other countrieswith currency traders even seeing the trend intensify under Donald Trump.
This Thursday, January 2, the Dollar Index, which compares the greenback to a basket of six currencies, stood at 109,281 points. Earlier he had reached its highest level since November 2022. First weighting of this basket, the euro has also fallen to a depth not seen for almost 26 monthsat 1.0226 dollars for one euro.
The day’s indicators confirmed that the American economy remained better positioned than its major competitors. Weekly jobless claims fell to their lowest level in eight months, taking economists by surprise.
Furthermore, the PMI index from S&P Global showed activity significantly higher than expected in the manufacturing sector in December in the United States. Its equivalent in the euro zone, published by the German bank HCOB, came out lower than projections and down over one month.
The same momentum until Trump’s inauguration
On the monetary front, operators see the American Federal Reserve (Fed) only carrying out, at best, one rate cut over the whole of 2025, compared to at least four for the European Central Bank (ECB).
This divergence is evident in the bond market, where the gap between ten-year US rates and their German equivalent remains close to a five-year high, recorded in mid-December. “We start the year and everyone is excited about the dollar,” commented Brad Bechtel of Jefferies.
“Considering Trump and the measures he could take, I think the dollar will continue its momentum over the coming weeks, probably until the inauguration” on January 20, the analyst anticipates.
During this period, Brad Bechtel does not exclude that the “greenback” – one of the nicknames for the dollar – will reach parity with the single currency. However, once the new Trump government is in motion, “we could see more turbulence“, warns the analyst.
Donald Trump’s unpredictable temperament and the uncertain effect of the cocktail of measures announced by the president-elect could thus increase volatility on the foreign exchange market.
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