However, the index could continue to see some downside risks after Friday's softer-than-expected inflation report reinforced the disinflation narrative and strengthened expectations for additional easing later this year. Forecasts now point to three rate cuts this year instead of two before the inflation data release. Momentum in the index will see Dollar pairs break through key levels of support and resistance, injecting life into trends.
Gold recorded its second consecutive recovery session and is currently trading around USD 4,970 per ounce, indicating that dip-buying demand remains present after the sharp sell-off that previously pushed prices down toward USD 4,400 per ounce. The current price action suggests that market sentiment has gradually stabilized, as investors begin to reassess the recent decline as being relatively rapid and driven more by technical factors rather than a fundamental deterioration in underlying conditions.
For decades, the United States stock market has been a juggernaut on the international stage. The US dollar has been - and still is - the de facto currency globally. But for how much longer that will be the case is now looking uncertain. As the New York Times reports, investors are starting to look elsewhere as the Trump administration continues to threaten the independence of its central bank, start a trade war with Europe, and implement self-conflicting monetary policies.
The resilience of gold above $4,800 per ounce at this stage reflects a delicate and complex balance between traditional supporting factors and emerging pressures-one that cannot be superficially interpreted or reduced to the movement of the dollar alone. It is true that the U.S. dollar's retreat from its recent peaks, after failing to sustain its recovery momentum from a four-year low, provided gold with a short-term breather and attracted some buyers.
London's blue-chip index finished up 118.02 points, or 1.15 per cent, at 10,341.56, reversing an early European sell-off and setting a new closing peak. Traders bet that the dollar's recent rally would boost earnings prospects for UK-listed multinationals, around three-quarters of which generate revenues in dollars. The session was marked by heavy volatility across asset classes: Gold prices fell a further 1.9 per cent to $4,648.76 an ounce, their lowest closing level since mid-January and more than 13 per cent below last week's record high.
It pushed the US dollar index to a four-year low and continues to drive gold and silver to fresh record highs this morning. Trade and geopolitical uncertainty, tied to an increasingly unreliable American friend and ally, as well as growing concerns about what will happen to the Federal Reserve's credibility once Jerome Powell leaves office (it will fly out of the window), continue to weigh on the US dollar.
Perhaps we should not have been surprised.In what now looks like a well-worn negotiating tactic, President Trump yesterday did a complete 180-degree U-turn from his previous threats and said he would not use military force to invade Greenland, would not impose tariffs on European countries resisting a U.S. takeover of Danish territory, and would accept "additional discussions" instead.The markets breathed a big sigh of relief.
The US dollar weakened at the open on Monday, pulling back from multi-week highs and underperforming against other major currencies. The move followed renewed geopolitical and trade tensions after President Donald Trump threatened several European countries with new tariffs in an effort to gain control over Greenland. Germany, the United Kingdom, France, Denmark, Norway, Sweden, the Netherlands and Finland were identified as potential targets, facing a proposed 10% tariff from February 1, which could rise to 25% in June unless an agreement is reached.
The US dollar remained in a consolidation phase on Thursday, holding close to multi-week highs. Inflation data released on Wednesday painted a broadly stable picture. Producer prices increased moderately on the month. Taken together with earlier CPI data, inflation trends appear neither re-accelerating nor cooling decisively. Retail sales provided a contrasting signal, rebounding strongly in November. Improved consumer spending, suggesting household demand remains relatively healthy, limiting immediate downside risks to growth.
The dollar is poised for its sharpest annual retreat in eight years and investors say more declines are coming if the next Federal Reserve chief opts for deeper interest-rate cuts as expected. The Bloomberg Dollar Spot Index has fallen about 8% this year so far. After tumbling in the wake of Donald Trump's "Liberation Day" tariffs in April, the greenback came under sustained pressure as the president kicked off his aggressive campaign to get a dovish appointee installed as Fed chair next year.
The dollar could remain under pressure, as it hovers near multi-week lows, and could extend last week's losses, as markets continue to expect additional interest rate cuts. The latter could continue to weigh on the greenback and US treasury yields. Attention now turns to a dense macro calendar that could define market direction in the weeks ahead. Tuesday's release of delayed nonfarm payrolls data for October and November will be closely scrutinised for confirmation of labour market cooling.
The US dollar was relatively flat today, stabilizing after a second week of declines. Weaker US labour data reinforced expectations of a Fed cut next week. Yesterday's ADP report showed a surprise 32,000 drop in private-sector jobs, signalling that the job market is losing steam and fuelling concerns about the economy. Markets are still pricing close to an 87% probability of a 25 bps rate cut at the December FOMC meeting, in addition to more cuts during 2026.
A simple strategy of borrowing in low-yielding currencies like the Japanese yen or the Swiss franc and putting your money in dollars looks set to beat the implied returns on markets such as European stocks and Chinese government bonds once the volatility of these assets is taken into account, according to Bloomberg calculations. That suggests the dollar will maintain its critical position in global portfolios, despite worries about its future this year as President Donald Trump shook up the global economic order.
The recent weakness in the greenback mainly reflects a return of "risk-on" sentiment following encouraging signals from budget negotiations in Washington, which have eased concerns over a potential U.S. government shutdown. As a result, capital has temporarily flowed out of safe-haven assets such as the dollar and back into risk assets like equities and commodities, allowing EURUSD to stage a notable technical rebound.
