The US dollar continues its upward trajectory, rising from a Dollar Index of 100.2 to 103.25 over the past two weeks. This surge is primarily driven by robust US economic data and expectations of slower interest rate cuts by the Federal Reserve, contrasting with a weakening Euro amid anticipated rate reductions by the European Central Bank (ECB).
As of early October, the Euro has dropped significantly against the dollar, falling from 1.12 to 1.0893. The ECB is expected to lower its deposit rate from 3.5% to 3.25% on Thursday, further diminishing the Euro's value. The strong performance of the US job market has led to speculation that the Fed may not cut rates as aggressively as previously thought, keeping the federal funds rate between 4.75% and 5.00%.
Political factors are also impacting the currency markets, with expectations rising for a potential return of Donald Trump as US President. His proposed trade policies, including significant tariffs on imports, are being factored into market valuations, strengthening the dollar further.
In contrast, the Mexican Peso has depreciated by up to 1.7% against the dollar due to geopolitical tensions and Trump's trade rhetoric. Analysts predict continued volatility in currency values as these developments unfold.