The U.S. dollar edged higher Monday, retaining recent strength as the US presidential election draws near and polls point to a rising likelihood of former President Donald Trump prevailing.
At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 103.462, after posting gains of around 0.6% last week.
Dollar boosted by Trump confidence
The dollar remained near its highest levels for over two months, boosted by increasing conviction that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained relatively healthy.
The CME Fedwatch showed traders have largely cemented a 25 basis point rate cut by the Federal Reserve in November.
The greenback has also been boosted by increased expectations that Donald Trump will defeat Kamala Harris in the 2024 presidential election, which is less than two weeks away.
Trump’s proposed tariff and tax policies are seen as likely to keep U.S. interest rates high and undermine currencies of trading partners.
“FX markets seem to be positioning for a Trump victory in next month’s US presidential election. October seems to have been a good month for Donald Trump in opinion polls and the dollar is bid across the board,” said analysts at ING, in a note.
Euro hit by weak German PPI
In Europe, EUR/USD edged 0.1% lower to 1.0850, after German producer prices fell more than expected in September, declining 1.4% year on year, instead of the 1.0% anticipated.
The European Central Bank is likely to cut its key interest rate down to its “natural” level between 2% and 3% but it may need to reduce it even further if a fall in inflation becomes entrenched, ECB policymaker Gediminas Simkus said on Monday.
“If the disinflation processes get entrenched… it’s possible that rates will be lower than the natural level,” Simkus, the Lithuanian central bank governor, told reporters in Vilnius.
GBP/USD fell 0.2% to 1.3022, after data showed that asking prices for British homes rose only 0.3% in October, well below their average for a 1.3% monthly increase for the month, according to property website Rightmove (OTC:RTMVY).
This, along with the surprise fall in services inflation last week, points to back-to-back rate cuts by the Bank of England in the upcoming months as the central bank attempts to stimulate the British economy.
Yuan slips after PBOC cuts rates
USD/CNY rose 0.2% to 7.1120, after the PBOC cut its benchmark loan prime rate by 25 basis points, with Monday’s cut coming amid a flurry of recent stimulus measures from Beijing.
China has announced its most aggressive round of stimulus measures yet over the past month, outlining both monetary and fiscal measures to shore up sluggish growth.
USD/JPY rose 0.3% to 149.91, but remained below 150 after having breached that key level briefly last week for the first time since early August.
