The U.S. dollar edged higher as markets bet on stronger U.S. growth and inflation. Policies from the incoming administration, including tax cuts and looser regulations, are expected to boost the economy. While these measures may promote short-term growth, concerns remain about their long-term effects.
Analysts suggest these policies could raise inflationary pressures and complicate the economic outlook. Uncertainty surrounding their implementation continues to influence currency trading.
The Federal Reserve’s approach to interest rates has fueled recent dollar strength. Policymakers reduced rates by 25 basis points, signaling future cuts depend on inflation trends. The Fed adjusted its 2025 inflation projections upward while lowering its interest rate forecast to 50 basis points.
Money markets currently price in minimal rate cuts next year. This cautious outlook reinforces the dollar’s position against major currencies.
U.S. retail sales surged 3.8% during the holiday season, thanks to last-minute shopping and competitive promotions. Meanwhile, jobless claims dropped to their lowest in a month, underscoring a resilient labor market.
These factors highlight consumer confidence, despite broader economic uncertainties. Strong spending data supported the dollar, pushing the index up 0.13% to 108.25, near its two-year high.
The dollar gained 0.31% against the yen, peaking at 157.93, the highest since July 17. The euro slipped to $1.0398, reflecting ongoing pressure from U.S. strength.
Bitcoin also faced declines, dropping 2.78% to $95,688.00, signaling broader market caution in cryptocurrencies.
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