U.S. Dollar Edges Higher on Expectations of Trump’s Policies to Boost Growth and Inflation
The U.S. dollar edged higher on Thursday, fueled by expectations that the incoming Trump administration’s policies will boost growth and lift inflation. Trading volumes were light on the day due to the Christmas holiday and the upcoming New Year’s holiday.
The dollar is expected to benefit from looser business regulations and tax cuts, which are expected to propel U.S. growth next year. However, analysts warn that a clamp-down on illegal immigration and the prospect of new tariffs on trading partners could increase price pressures and weigh on the economy longer term.
The Federal Reserve is also expected to play a key role in the dollar’s performance. While the central bank cut rates by 25 basis points last week, there are doubts over how many interest rate cuts will be undertaken next year. Fed Chair Jerome Powell has indicated that further rate cuts will depend on further progress in lowering stubbornly high inflation.
Data released on Thursday showed that the number of Americans filing new applications for jobless benefits dipped to its lowest level in a month, consistent with a cooling but still-healthy U.S. labor market. U.S. retail sales also rose 3.8% between November 1 and December 24, driven by intense promotion to drum up sales in what was expected to be a highly competitive holiday season for retailers.
The dollar is currently holding just below a two-year high, and is expected to continue to benefit from the expected policies of the incoming administration. The euro slipped 0.06% to $1.0398, while the greenback gained 0.31% to 157.89 Japanese yen. In cryptocurrencies, bitcoin fell 2.78% to $95,688.00.