In Europe, EUR/USD hit its lowest level since November 2023 as concerns over U.S. tariffs and German political uncertainty intensified, while ECB policymaker Olli Rehn suggested additional rate cuts could bring the deposit rate to neutral by mid-2024. Sterling lagged after data showed a slowdown in British wage growth, while the unemployment rate edged up. Meanwhile, market yields rose, with the 2s-10s yield curve widening, and U.S. equities saw a slight dip. Commodity prices were mixed, with oil holding steady after OPEC lowered its demand forecast, gold slipping 0.8%, and copper dropping on concerns over potential U.S.-China tensions. Key currency moves near close included EUR/USD down 0.37%, USD/JPY up 0.68%, and GBP/USD down 0.99%.
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EUR/USD Falls as Dollar Soars
The dollar index soared to a five-month high on Tuesday, driven by investor expectations that protectionist measures from incoming U.S. President-elect Donald Trump could dampen global growth while increasing inflation in the United States. With a mix of buying from investors, models, and options, the dollar gained against all major currencies and appears poised to test its year-to-date high. The Federal Reserve Bank of New York reported that U.S. consumers in October expressed confidence in a steady job market and declining inflation risk, a sentiment echoed by Richmond Fed President Thomas Barkin, who confirmed that the Fed is prepared to act if inflation rises or employment weakens.
