Investing.com – The US dollar slipped lower on Monday, on the defensive at the start of a new week that will see Donald Trump return to the White House, with volumes hit by the US holiday.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% lower at 108.925, but still to be far from the more than two-year high seen last week. .
Dollars on the backfoot
The dollar has started the new week on the backfoot, having gained about 4% since the US presidential election in November as traders expected Trump's policies to be inflationary, requiring higher interest rates for a longer period of time.
Volumes are likely to drop on Monday as US markets are closed for the Martin Luther King Jr. Day holiday, and as traders await Trump's inaugural address later in the day.
Investors are watching closely as Trump prepares to begin his second term in office after the incoming president announced plans to sign several executive orders on his first day.
“Financial markets are trying to see what executive orders US President Donald Trump will implement on his first day,” said analysts at ING, in a note.
“The FX markets are very interested in what he has to say about tariffs and what kind of pain the Oval Office intends to inflict on major trading partners.”
ING said, “after four months of buying on the rumour, the dollar is now open to some selling on the truth – but there should be plenty of dollar buyers.”
The Euro is rebounding from a two-year low
In Europe, it rose 0.3% to 1.0313, but remained near a two-year low touched last week amid concerns about a trade war, after the Central Bank of – Europe's Isabel Schnabel said at the weekend that a trade conflict was “very likely.”
“Perhaps the euro should be concerned that the online prediction markets have only low prices on the EU this week,” said ING. “Also, we doubt that markets Fully priced FX to universal tariffs and that EUR/USD would be hit if they appeared.”
It rose less than expected in December, data showed earlier on Monday, climbing 0.8% on the year, below the 1.1% increase expected.
The European Central Bank has cut interest rates four times since June and is expected to continue to do so in the next six months, after seeing inflation in the euro area fall from figures double at the end of 2022 to slightly above the 2% target.
trading 0.1% higher to 1.2193, with sterling down almost 3% over the past month after recent weak economic data signaled more interest rate cuts in the year ahead.
It cut interest rates twice in 2024, and is widely expected to cut rates in February, the next policy setting meeting.
Yen awaits BoJ meeting
In Asia, it fell 0.1% to 156.19, as markets priced in an interest rate hike at the Bank of Japan policy meeting to come later this week.
This is expected to increase interest rates, as long as there is no market turmoil after Trump's inauguration.
trading 0.2% lower to 7.3143, after the People's Bank of China's decision to hold steady, with the one-year prime lending rate unchanged at 3.1% and the five-year rate, used to set mortgage rates, at 3.60%.
The move, which was aimed at supporting a weakening yuan, maintaining liquidity, and supporting economic recovery, did little to affect market sentiment for the currency. – border.
