The US dollar index hit its highest level in more than two years on Thursday, as the new trading year began and investors prepared to return Donald Trump to the White House this month.
The greenback gauge against a basket of currencies was up 0.8% at 11:20 a.m. ET, its strongest level since November 2022.
Optimism about the US economy was in focus as markets reopened after choppy trading over the Christmas and New Year holidays. Wall Street stock price history opened higher although it was traded later.
“(U.S.) growth has already exceeded forecasts as consumers and companies have softened the impact of high interest rates, with the unemployment rate remaining low,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown, in a note on Thursday.
“Investors are hoping a goldilocks scenario will be the story of 2025, amid promises of lower taxes and deregulation under a second Trump presidency.”
Euro/US Dollar
“The greenback continues to find support from expectations of Trump's USD-bullish policies and bearish conviction around the Fed's rate cut path for 2025,” said Mohamad Al-Saraf, FX and fellow pre- rate strategy at Danske Bank, in a Thursday note.
Key data ahead in assessing the strength of the US macro report include Thursday's jobless claims and Friday's ISM manufacturing report, along with next week's nonfarm payrolls, Al- Saraf.
He said the euro was likely to fall back to parity with the US dollar in the medium term. However, Al-Saraf said market prices for less than two quarterly rate cuts this year may be too hawkish, and coupled with any negative data surprises from the US could trigger a dollar correction.
