The US dollar made a significant recovery after hitting a low around 98.65 during the Asian session, moving back into a bullish pattern and surpassing the 99.00 threshold to test Wednesday’s peak of 99.06 in early European trading.
The U.S. dollar index, which tracks the dollar against six major currencies, is poised for its strongest weekly performance of the year, thanks largely to steep declines in both the euro and yen amid political and financial turmoil in France and Japan.
The euro and yen’s decline boosts the US dollar
On Monday, French Prime Minister Sébastien Lecorne unexpectedly resigned, leading to a dramatic drop in the euro. Now, markets are waiting to see who President Emmanuel Macron will appoint as the sixth prime minister, tasked with addressing the budget deficit amidst strong opposition in parliament.
Meanwhile, in Japan, the yen weakened following the election of fiscal dove Sanae Takaichi as head of the Liberal Democratic Party, sparking speculation about a revival of Abenomics involving expansive spending and monetary easing.
Despite concerns regarding a potential U.S. government shutdown and market anticipation of further interest rate cuts from the Fed, investors seemed more focused on upcoming speeches from Federal Reserve Chairman Jerome Powell and Deputy Oversight Committee Chairman Michelle Bowman at a banking conference in Washington today.
Minutes from the Federal Reserve’s September meeting, released Wednesday, highlighted divisions among policymakers regarding the short-term monetary policy, complicating the central bank’s position amidst a slowing labor market and rising inflation risks.
