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The U.S. dollar remained near a three-week peak against major currencies on Monday as financial markets braced for a busy week of central bank policy meetings. Investors are closely watching the Federal Reserve, which is widely expected to lower interest rates while signaling a gradual approach to further easing throughout 2025.
The U.S. dollar index, which measures the currency against six others, ticked up 0.1% to 106.98 by 1220 GMT, after climbing to a high of 107.18 on Friday—its strongest level since November 26. The euro slipped 0.1% to $1.0494, just above its recent low of $1.0453, following a surprise downgrade of France by Moody’s on Friday. Meanwhile, sterling managed a modest rebound, rising 0.33% to $1.2650 after hitting its lowest level in two weeks on Friday, as disappointing economic data fueled concerns about the British economy.
Traders are highly confident the Fed will announce a 25-basis-point rate cut at the conclusion of its two-day policy meeting on Wednesday. However, expectations for further easing in January have waned, with the CME FedWatch tool showing diminishing odds of another immediate rate cut. Federal Reserve policymakers have acknowledged recent upward inflationary pressures but continue to frame these fluctuations as temporary disruptions in the broader path toward price stability. Even so, analysts warn that inflation risks could resurface as President-elect Donald Trump prepares to take office in January.
The Fed’s updated projections this week are unlikely to account for any potential shifts in fiscal or regulatory policies under the incoming administration. Nonetheless, financial markets remain focused on the long-term outlook for U.S. monetary policy, with investors awaiting clarity on whether the Fed will maintain its cautious pace of rate reductions as inflation trends evolve.
The Japanese yen also came under pressure, sliding 0.1% to 153.92 against the dollar—its weakest point since late November. This decline followed reports that the Bank of Japan might skip a rate hike during its Thursday meeting, despite persistent inflation challenges in the country. The yen’s latest dip adds to last week’s steep selloff, marking its sharpest weekly loss since September.
Meanwhile, European Central Bank President Christine Lagarde reiterated that further rate cuts remain on the table should eurozone inflation continue to decline toward the ECB’s 2% target. Although a recent survey showed a moderation in the region’s business activity downturn, markets remain wary of ongoing economic challenges. Germany, the eurozone’s largest economy, faces headwinds from high energy costs and weakened export demand, further complicating the ECB’s policy outlook.
In the United Kingdom, the Bank of England is also expected to make a pivotal policy announcement this week, following Monday’s data indicating rising price pressures and stagnant business activity. The BOE’s decision comes amid heightened uncertainty over the trajectory of the British economy, particularly after last week’s unexpected contraction in GDP.
Bitcoin Hits Historic Milestone Amid Trump’s Crypto-Friendly Stance
In the cryptocurrency market, Bitcoin surged to a record high of $106,533 on Monday, extending its rally as optimism around crypto-friendly policies under President-elect Donald Trump gained traction. The digital asset pared some of its gains in midday European trading, easing back to $103,916 but still marking a significant milestone for the world’s largest cryptocurrency.
Investor enthusiasm was bolstered by Trump’s comments during a recent CNBC interview, where he confirmed plans to establish a U.S. bitcoin strategic reserve modeled after the country’s strategic petroleum reserve. Trump’s embrace of cryptocurrency marks a stark contrast to his earlier skepticism, with the president-elect vowing to position the United States as “the crypto capital of the planet” during his campaign.
Governments worldwide are closely monitoring the growing influence of cryptocurrencies. The United States already holds nearly 200,000 bitcoins valued at over $20 billion, according to CoinGecko. Other countries, including China, the United Kingdom, and El Salvador, also maintain significant bitcoin reserves as part of their broader economic strategies.
The recent surge in Bitcoin’s value reflects heightened investor interest in digital assets as potential alternatives to traditional currencies. Analysts note that Trump’s pro-crypto stance, combined with the inclusion of MicroStrategy in the Nasdaq 100 index, has further fueled bullish sentiment across the crypto market. MicroStrategy, a leading corporate holder of Bitcoin, has seen its stock skyrocket this year, reinforcing the growing role of digital currencies in mainstream finance.
As financial markets prepare for a week of key policy announcements and evolving geopolitical developments, both traditional and digital assets are poised to remain in focus. Investors will closely monitor the Federal Reserve’s decisions, central bank actions globally, and Bitcoin’s continued ascent in this dynamic and uncertain environment.
