Dollar set for third weekly gain as 'Trump trade' gathers pace
Published: 06:10 PM,Oct 18,2024 | EDITED : 10:10 PM,Oct 18,2024
SINGAPORE/LONDON: The dollar headed for its third weekly gain in a row on Friday, helped by a dovish European Central Bank and strong US data that is pushing out expectations for how fast US rates can fall, particularly if Donald Trump wins the presidency.
A slew of economic data from China, including third-quarter growth figures, met with a muted response from markets, though subsequent comments from the country's central bank providing further details of Beijing's stimulus measures helped lift Chinese assets broadly.
Data on Thursday showed US consumer spending beat expectations last month, which added to the belief among investors that US rates may not need to drop as quickly as many thought just a couple of weeks ago.
The ECB cut euro zone interest rates by a quarter point on Thursday, in line with expectations, in a nod to the deterioration in economic growth across the region.
The euro, which is around its lowest since early August, is heading for its largest three-week decline against the dollar since 2022, down around 3%, as traders are now pricing in back-to-back rate cuts at the ECB's upcoming meetings.
Adding to the dollar's shine was the rising prospect of Trump winning the November election, since his proposed tariff and tax policies are seen as likely to keep US interest rates high. 'I think there is potential for further decline in the euro. The ECB has cut rates and didn't give any hints about cutting in December, but given where inflation is, and given that the economic outlook is deteriorating, they are focusing on attempting to shore up the economy a bit more,' City Index market strategist Fiona Cincotta said.
'I see potential for a future drop in the euro towards that $1.08 level,' she said. The euro was last up 0.16 per cent on the day at $1.0848, having fallen for 14 out of the last 16 sessions.
A slew of economic data from China, including third-quarter growth figures, met with a muted response from markets, though subsequent comments from the country's central bank providing further details of Beijing's stimulus measures helped lift Chinese assets broadly.
Data on Thursday showed US consumer spending beat expectations last month, which added to the belief among investors that US rates may not need to drop as quickly as many thought just a couple of weeks ago.
The ECB cut euro zone interest rates by a quarter point on Thursday, in line with expectations, in a nod to the deterioration in economic growth across the region.
The euro, which is around its lowest since early August, is heading for its largest three-week decline against the dollar since 2022, down around 3%, as traders are now pricing in back-to-back rate cuts at the ECB's upcoming meetings.
Adding to the dollar's shine was the rising prospect of Trump winning the November election, since his proposed tariff and tax policies are seen as likely to keep US interest rates high. 'I think there is potential for further decline in the euro. The ECB has cut rates and didn't give any hints about cutting in December, but given where inflation is, and given that the economic outlook is deteriorating, they are focusing on attempting to shore up the economy a bit more,' City Index market strategist Fiona Cincotta said.
'I see potential for a future drop in the euro towards that $1.08 level,' she said. The euro was last up 0.16 per cent on the day at $1.0848, having fallen for 14 out of the last 16 sessions.