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During the European session on Friday, EUR/USD faced selling pressure near the key resistance level of 1.0800. The pair failed to extend Thursday’s recovery momentum as the US dollar (USD) resumed its upward journey after a sharp correction.
The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, rebounded to nearly 104.65. The index had retreated to nearly 104.20 on Thursday after hitting a more than four-month high of 105.50 following Donald Trump’s victory in the US presidential election.
The dollar’s recovery can be attributed to the victory of Trump, who campaigned on a pledge to raise import tariffs by 10% and lower corporate income taxes. Market experts believe that once Trump’s fiscal policy is implemented, it will lead to an increase in investment, spending and labor demand, thereby raising the upward risk of inflation and forcing the Federal Reserve (FED) to choose a restrictive monetary policy stance.
Federal Reserve Chairman Jerome Powell said Thursday that he does not expect Trump’s return to the White House to have any near-term impact on the central bank’s policy decisions. We do not guess, speculate, or assume what the government’s policy choices will be in the future,” Powell said after the bank decided to cut interest rates by 25 basis points (bps) to 4.50%-4.75% as scheduled.
Asked about the future path of interest rates, Powell expressed confidence in the continuation of the policy easing cycle, saying he was optimistic that inflation would remain on track to the bank’s 2% target amid softening labor market conditions. manner.
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