Dollar Retreats After Post-Election Surge, Markets Eye Central Bank Moves

The U.S. dollar pulled back slightly on Thursday, easing from a four-month high reached after Donald Trump’s victory in the 2024 presidential election. Market participants are now focused on upcoming monetary policy announcements from the Federal Reserve and other central banks.

Fed Rate Cut Anticipated

The Federal Reserve is expected to lower interest rates by 25 basis points later in the day. Investors will closely watch for any indications that the central bank might pause its rate-cutting cycle in December. This comes amid concerns over the labor market, highlighted by last week’s weaker-than-expected October jobs report, which was complicated by hurricane disruptions and recent labor strikes.

Trump’s policy agenda, which includes restricting illegal immigration and imposing new tariffs, has fueled expectations that inflation could rise, potentially influencing the Fed’s future decisions. The possibility of the Fed adopting a less aggressive rate-cutting stance has also led to a spike in U.S. Treasury yields, which climbed to multi-month highs on Wednesday.

The dollar index, which tracks the greenback against six major currencies, fell 0.16% to 104.94, down from a peak of 105.44—the highest since early July. This index had recorded its largest single-day gain since September 2022 following Trump’s election win.

Euro and Pound Recover, Yen Weakens

The euro edged up 0.11% to $1.0742, bouncing from Wednesday’s low of $1.0683, the weakest level since late July. The British pound also saw gains, rising 0.37% to $1.2927, as investors awaited the Bank of England’s (BoE) rate decision. The BoE is expected to announce its second rate cut since 2020 but might provide insights into future monetary policy, especially after the government’s inflation-driving budget.

The Japanese yen dropped to a three-month low against the dollar, reaching 154.715. Japan’s currency officials, including top diplomat Atsushi Mimura, have signaled a willingness to intervene if speculative pressure intensifies. The yen later recovered slightly to 154.09 per dollar, with analysts noting that Tokyo’s verbal interventions might limit further downside in the short term.

Other Currency Movements

The offshore yuan strengthened, trading at 7.1907 per dollar, after better-than-expected Chinese export data provided support. The Australian dollar rose 0.72% to $0.6618, and the New Zealand dollar (kiwi) increased 0.75% to $0.59835, both benefiting from the robust Chinese trade figures.

Cryptocurrencies and Commodities

In the cryptocurrency market, Bitcoin fell 1.6% to around $74,766, retreating from Wednesday’s record high of $76,499.99. Ether, however, surged over 6%, reaching $2,881.16, its highest level since early August.

The market now awaits further cues from the Fed and other central banks, as shifts in monetary policy and global economic conditions remain pivotal drivers of currency and asset price movements.