U.S. dollar

Global markets were buoyed on Monday morning by expectations of another Fed rate cut and growing optimism that the US and China are moving closer to a trade deal, following comments from President Donald Trump.

The optimism wiped out gains in safe-haven assets such as gold futures and boosted stock exchanges across the globe.

Yet, leading European benchmark indexes opened mostly flat, except for Milan’s FTSE MIB, which was up by 0.61%. Madrid IBEX 35 also gained 0.37% by around 11:00 CEST.

At the same time, European benchmark STOXX 600, as well as the FTSE 100 in London, remained nearly flat. The DAX in Frankfurt gained 0.15% while Paris’ CAC 40 lost less than 0.1%. This came after credit rating agency Moody’s changed France’s outlook from stable to negative on Friday.

Investors in Europe are closely watching for signs of economic health, with one of the strongest indicators — the first reading of the eurozone’s third-quarter GDP — due on Thursday.

On the same day, the European Central Bank (ECB) is scheduled to hold its monetary policy meeting. Given that inflation in the bloc has remained around the bank’s 2% target, the ECB is expected to hold interest rates steady this week for its third straight meeting. The key deposit rate has been at 2% since June.

US-China relations

Across the globe on Monday, US futures were mostly up in pre-market trading. This came as Asian shares rallied too, with Japan’s benchmark Nikkei 225 topping 50,000 for the first time.

Later this week, the US President has a scheduled meeting with the Chinese leader Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation forum (known as APEC), to discuss the trade deal between the world’s two strongest economies.

US and Chinese officials confirmed on Sunday that they had reached an initial consensus for Trump and President Xi Jinping to finalise during a meeting later in the week.

“I have a lot of respect for President Xi,” Trump told reporters after visiting Malaysia for a summit of Southeast Asian nations, where he reached preliminary trade agreements with Malaysia, Thailand, Cambodia, and Vietnam.

“I think we’re going to come away with a deal,” Trump said.

And investors see it as a strong signal. According to Stephen Innes of SPI Asset Management: “This isn’t just photo-op diplomacy. Behind the showmanship, Washington and Beijing’s top trade lieutenants have quietly mapped out a framework that might, just might, keep the world’s two largest economies from tearing up the field again.”

The enthusiasm brought about a shift in risk-taking among investors, demonstrated by a fall in gold futures. The safe-haven asset’s continuous contract fell by almost 2% on Monday morning, as an ounce was priced at $4,055.50.

The euro and Japanese yen remained flat against the US dollar. One euro was traded at $1.1638, while the greenback cost ¥152.8070. The British pound climbed 0.26% against the US dollar, and the rate was at $1.3345.

Crude oil prices fell after European markets opened, with both benchmarks trading nearly 1% lower. The US benchmark WTI crude’s price was $61.06 a barrel, and Brent was at $65.47.

In other dealings, leading cryptocurrencies were up. CoinDesk’s Bitcoin Price Index (XBX) gained 4.86% and climbed to $115,395.34. Ethereum cost $4,171.84, up by 4.82% on Monday morning in Europe.

Another Fed rate cut on the cards, coupled with Big Tech reports

Wall Street hit record highs on Friday, after lower-than-expected inflation numbers from the US fuelled further hope that the Federal Reserve is about to cut interest rates further this Wednesday.

The data on inflation was encouraging because it could mean less pain for lower- and middle-income households struggling with still-high increases in prices. Even more importantly for Wall Street, it could also clear the way for the Federal Reserve to keep cutting interest rates in hopes of giving a boost to the slowing job market.

The Fed just cut its main interest rate last month for the first time this year, but it’s been hesitant to promise more relief because lower rates can make inflation worse, beyond boosting the economy and prices for investments.

Meanwhile, a flood of big tech companies’ earnings is on its way this week, with Microsoft, Meta and Google-parent Alphabet reporting on Wednesday. Apple and Amazon’s numbers are due to be released on Thursday.

Better-than-expected profits could fuel hopes for steady growth in the US. Information is scarce about the current state of the world’s biggest economy due to the prolonged government shutdown.

ADVERTISEMENT

US futures sank, the dollar slipped, and world shares were mixed after a US government shutdown began on Wednesday.

The partial closure of the federal government is feared to have economic implications if it lasts, and Washington is bracing for what could be a prolonged deadlock. This comes after lawmakers missed the deadline to agree on funding for the government.

Equity markets in Europe were volatile in the morning on Wednesday, as investors reacted to the news from across the Atlantic. Major European stock indexes started trading mostly in negative territory, but the picture fundamentally changed by midday.

“The US government shutdown has left investors wondering what might happen next, with a minor pullback on European equity markets and weaker futures prices for Wall Street,” said Russ Mould, investment director at AJ Bell.

At first, the FTSE 100 in London made an exception of the negative trend, rising 0.7% two hours after the opening, “thanks to a surge in pharmaceutical stocks”.

Soon enough, the German DAX turned its initial loss of 0.3% into a gain of more than 0.3%, just like the CAC 40 in Paris. The IBEX 35 in Madrid was down by nearly 0.2% at around midday.

US futures were mostly down at the same time, with the S&P 500 dropping 0.5%, the Dow Jones Industrial Average slipping 0.5%, and the Nasdaq down 0.6%.

Eurozone inflation ticked up in September

The trend in Europe’s equity markets was also influenced by freshly released eurozone inflation data, showing that prices have increased by 2.2% in September. This is slightly above the European Central Bank’s 2% target, where eurozone inflation had been sitting for the previous three months. Core inflation remained stable at 2.3%, despite services edging up modestly.

“The outlook has not changed and still clearly points to inflation descending thanks to cooling wage growth, low energy commodity prices, a stronger euro, and contained demand-side pressures,” said Riccardo Marcelli Fabiani, senior economist at Oxford Economics.

He added that the September rise in inflation will cement the ECB’s conviction that further easing would be overdue. “Only a strong surprise in inflation could spur a cut this year.”

The US shutdown’s impact on the equity markets

While trading activity was expected to slow in the case of a shutdown in the US, many investors didn’t sell off their holdings.

One explanation is that past US government shutdowns have had a limited impact on the economy and the stock market, and investors may be predicting something similar this time around. Many analysts agree that the market is tuning out the political noise and focusing on the economic fundamentals.

However, if the shutdown lasts, it is expected to prevent the Friday release of a monthly labour market report. This is key for investors and for the Federal Reserve to get a pulse check on the US economy and decide whether to cut interest rates again.

But the stubborn positivity among investors may last, continuing the relentless run the US stock markets have been on since hitting a low in April. The bullish market sentiment is fuelled by expectations that President Donald Trump’s tariffs won’t derail global trade and that the Federal Reserve will cut interest rates several times to boost the slowing job market.

Meanwhile, Tuesday brought mixed reports on the US economy. A Conference Board survey showed consumers are feeling less confident than economists expected, with many respondents pointing to the job market and to stubborn inflation.

A second report suggested the job market may be remaining in its “low-hire, low-fire” state. US employers were advertising roughly the same number of job openings at the end of August as the month before. The hope on Wall Street had been for a moderate number, one balanced enough to keep the Fed cutting interest rates.

The central bank just delivered its first cut of the year, and officials have pencilled in more this year.

Bonds, gold and oil

The US shutdown had a limited impact on US Treasury yields, which rose slightly as European markets opened. This could be explained by the fact that the shutdown had been anticipated and it is not expected to last long.

In other news, gold has struck a new record, with the safe-haven asset hitting $3,918.80 before midday in Europe.

Oil prices reflected concerns, meanwhile, with US benchmark crude oil losing nearly 1% to $61.75 per barrel. Brent crude, the international standard, lost nearly 0.9% to $65.44 per barrel.

The US dollar fell to 147.13 Japanese yen from 147.94 yen. The euro climbed to $1.1745 from $1.1734. The British pound gained slightly, coming to $1.3470.

Shares in Japan slid, rising elsewhere in Asia

In Asia, Japan’s Nikkei 225 index shed 0.9% after the Bank of Japan (BOJ) reported a slight improvement in business sentiment among major manufacturers.

The indications from the BOJ’s quarterly tankan survey raise the odds that the central bank will increase its key interest rate to counter inflation that has topped its target range of about 2% for some time.

Political uncertainty is also looming over Japan’s markets, with the ruling Liberal Democratic Party due to choose a new leader and prime minister later this week to replace embattled Prime Minister Shigeru Ishiba.

Markets and offices in mainland China are closed 1-8 October for the National Day holiday. Elsewhere in Asia, South Korea’s Kospi gained 0.9%, while Taiwan’s Taiex added 0.6% on heavy buying of semiconductor-related shares. Australia’s S&P/ASX 200 slipped less than 0.1%. In India, the Sensex rose 0.6%.

ADVERTISEMENT

The euro breached the $1.17 mark on Thursday, reaching levels last seen in September 2021. This 13% year-to-date surge positions the common currency on course for its strongest annual performance since 2017 — and potentially even since 2003. The rally therefore brings the euro closer to the psychologically significant 1.20 threshold.

Since Donald Trump’s inauguration on 20 January 2025, the euro has appreciated roughly 15% against the dollar. But what are the reasons behind the euro’s recent success, and how much further can it rise?

Fiscal turn in Germany is a game changer

The explanation lies in an unusual convergence of fiscal stimulus in Europe, waning confidence in US monetary policy, and a build-up of speculative dollar short positions that are fuelling the euro’s ascent.

While the European Central Bank (ECB) has extended its rate-cutting cycle, the key shift underpinning the euro’s strength has come from fiscal policy — particularly in Germany.

In March, the Bundestag approved a constitutional amendment exempting military and infrastructure spending from the country’s strict “debt brake” law.

This legal reform paved the way for a €500 billion infrastructure fund, earmarked for green energy, digital transformation, and regional development through 2035 — all structured off-budget to bypass debt constraints.

Simultaneously, Berlin has pledged to increase defence spending to 3.5% of GDP, aligning with NATO’s Readiness 2030 goals and the broader €800 billion ReArm Europe initiative.

US turmoil weighs on dollar sentiment

Across the Atlantic, the US economy has shown signs of softening. First-quarter GDP contracted, driven partly by a front-loading of imports ahead of new tariffs which were set to take effect in April.

However, market attention has focused more sharply on the political pressure mounting against Federal Reserve Chair Jerome Powell.

Despite Powell reiterating this week that rate cuts are premature — citing solid growth and tariff-driven inflation uncertainties — investor confidence in Fed independence has been shaken.

According to BBVA analysts: “Jerome Powell is not leaning toward a rate cut as soon as July, although there is an internal debate at the Fed about the timing of the next rate cut, and it may well continue to grow.”

They added that the dollar’s weakness has deepened “amid reports that US President Donald Trump is considering selecting and announcing a replacement for Fed Chair Jerome Powell by September or October”. This is despite the fact that Powell’s term is set to end in May 2026.

Markets interpret this as a potential “shadow chairman” scenario, where someone behind the scenes could keep interest rates low, thereby putting negative pressure on the dollar.

Euro-dollar outlook: What analysts are watching

Francesco Pesole, analyst at ING, underscored the growing relevance of upcoming US employment data.

“News on the jobs market has significant impact potential now that inflation figures for May have failed to trigger a dovish response by Powell. The rationale could be that if something moves on the second part of the mandate (full employment), a few more FOMC members could join the dovish ranks despite inflation concerns.”

He noted that markets currently price a one-in-four chance of a rate cut on 30 July and 62 basis points of easing by the end of the year.

Meanwhile, investor positioning continues to steer euro-dollar movements.

Matthew Ryan, Head of Market Strategy at Ebury, said: “EUR/USD is almost entirely driven by rising dollar shorts, rather than a more positive outlook for the common bloc’s economy.” In other words, the euro is rising against the dollar because investors are betting against the greenback, rather than placing more faith in the euro.

Technical indicators also point to continued momentum. Luca Cigognini, analyst at Intesa Sanpaolo, commented: “The short-term structure of EUR/USD remains generally bullish. A break above 1.1717, now a resistance level, could push the euro toward 1.1750, raising the next target to 1.1800/1.1820.”

Beyond those levels, traders are eyeing resistance at 1.1910 — the highs of August 2021 — followed by the psychological barrier at 1.20.

Higher targets include 1.2350 (January 2021) and 1.2550 (February 2018), but much will depend on how economic indicators and political developments evolve in the second half of the year.

Published on
24/06/2025 – 7:59 GMT+2

ADVERTISEMENT

Stocks rallied on Tuesday after US President Trump said that a “complete and total ceasefire” between Iran and Israel would take effect in the coming hours.

Iran’s foreign minister denied that an official ceasefire agreement had been reached, but noted that Tehran would not continue its attacks as long as Israel halted its “aggression”. At the time of writing, Israel had yet to comment.

The truce, which Trump is labelling the end of the “12-day war”, came after Iran attacked a US base in Qatar on Monday, retaliating against the US bombing of its nuclear sites over the weekend.

In response to Tuesday’s development, oil prices dropped as fears over a blockage to the Strait of Hormuz subsided. 

About 20% of global oil and gas flows through this narrow shipping lane in the Gulf.

Brent crude, the international standard, dropped 2.92% to $69.39, while WTI dropped 3.18% to $66.35.

Last week, Brent reached over $78 a barrel, a level not seen since the start of this year.

Looking to the US, S&P 500 futures rose 0.58% to 6,112.00 on Monday, while Dow Jones futures increased 0.51% to 43,118.00.

Australia’s S&P/ASX 200 jumped 0.89% to 8,550.10, South Korea’s Kospi rose 2.75% to 3,097.28, and the Shanghai Composite index climbed 1.07% to 3,417.89.

Hong Kong’s Hang Seng rose 2% to 24,162.70 and the Nikkei 225 increased 1.16% to 38,796.39.

The US Dollar Index slipped by 0.32% to 98.10. The euro gained 0.25% against the dollar while the yen dropped 0.48% in comparison to the greenback.

Economists had suggested that persistent threats to oil would increase the value of the US dollar and hurt other currencies such as the euro, notably as the US economy is more energy independent.

Greg Hirt, chief investment officer with Allianz Global Investors, told Euronews earlier this week that although the dollar may see a short lift on the Iran-Israel conflict, “structural issues around a twin deficit and the Trump administration’s volatile handling of tariffs should continue to weigh on an overvalued US dollar”.

Published on
23/06/2025 – 15:51 GMT+2

ADVERTISEMENT

The dollar rose on Monday as uncertainty over the Israel Iran conflict persisted following US strikes on Iranian nuclear facilities over the weekend.

By around 2.45 CEST, the Dollar Index had risen 0.61% in daily trading to 99.31.

Over the month, it showed a 0.19% increase, although its year-to-date value was still down almost 9%, failing to win back losses linked to erratic policies from the Trump administration.

US President Donald Trump said that the weekend strikes had caused “monumental damage”, although some Iranian officials downplayed the impact. The full extent of the damage could not immediately be determined by the UN’s nuclear watchdog. 

Israel — meanwhile — continued with its strikes on Iran on Monday, while Tehran vowed that it would “never surrender to bullying and oppression”.

Several nations warned Iran against a retaliatory closure of the Strait of Hormuz, a shipping lane responsible for around 20% of global oil and gas flows.

“In this morning’s trading session, the dollar staged an expected rebound. The demonstration of US military strength, as well as the fear of higher oil prices, weakened the euro,” said ING economists in a note.

Higher oil prices would likely drive up inflation and discourage the US Federal Reserve from cutting rates in the near future. This would spell bad news for US consumers but would simultaneously increase the dollar’s attractiveness to investors.

“Looking ahead, one of the key questions is whether US involvement in the conflict could restore the dollar’s safe-haven appeal. Here, a crucial factor will be the duration of any potential Strait of Hormuz blockade. The longer such a blockade lasts, the higher the likelihood that the value of safe-haven alternatives like the euro and yen is eroded, and the dollar can enjoy a decent recovery,” said ING economists.

The greenback’s value has dropped significantly this year as policies from the Trump administration have spooked investors, damaging the currency’s status as a safe-haven asset.

Signals worrying investors are not solely linked to trade policy, but also include a high US deficit, the cost-slashing bureau DOGE, sudden cuts to foreign aid, withdrawals from international treaties, and the prospect of financial deregulation.

Greg Hirt, chief investment officer with Allianz Global Investors, told Euronews that “structural issues around a twin deficit and the Trump administration’s volatile handling of tariffs should continue to weigh on an overvalued US dollar”.

Even so, he noted that the “short term potential for higher oil prices will likely affect the Chinese and European economies to a greater extent, as they are more dependent on oil imports than the US”.

Ryan Sweet, chief US economist at Oxford Economics, reiterated this point, noting that “the US economy is essentially energy independent but others are not, including Japan as it imports most of its oil from the Middle East”.

Sweet told Euronews that dollar gains are positive but still muted as “currency markets are in a wait and see mode”.

There is also significant uncertainty around President Trump’s tariff deadline, with a 90-day pause on so-called “reciprocal” duties set to expire on 9 July.