The US dollar continued its advance against its main rival currencies on expectations of increased fiscal spending and lower taxes under Donald Trumpâs administration. The greenback was further supported by the rising likelihood of an interest rates hike by the Federal Reserve is December.
Bond yields and inflation rate in the USA will probably climb as the Republican president-elect takes up office and starts bringing his promises into reality. Investors are speculating that Trump might not actualizes much of his promises for the US foreign policy, which erased most of the initial stress that markets had toward his presidency.
Once in office next January, Trump might instead focus on implementing his domestic plans of increased fiscal spending and tax cuts. These plans are expected to improve economic growth in the USA, while at the same time raising inflation, which would prompt the Federal Reserve to increase its interest rates faster.
Forecasts of a rate hike increased after Federal Reserveâs Vice Chair Stanley Fischer said on Friday that the US economy appears stable enough to raise interest rates. Futures prices showed an 85.8% chance of a rate hike following the meeting of the Federal Open Market Committee on December 14, according to the CME Group FedWatch Tool.
EUR/USD dropped to 1.0726 as of 17:20 GMT today as the pair declined from 1.0836, its opening level on Monday. EUR/USD touched 1.0710 earlier today, the pairâs lowest level since December 2015.
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