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It is exactly three weeks since we spoke about the US dollar (see 6 November 2024 edition of Chart of the week here). At the time, we noted the change in trend as it bounced from a low for the year. This was driven by a change in view of the pace of interest rate cuts in the US and a stream of stronger economic growth figures from the US. Since then, as we can see in the chart below, the US dollar has taken another leg up, 4% in the month of November.
The former reasons still stand, economic growth and interest rate differentials moving in favour of the US dollar. Add to that the result of the US Presidential election which has yielded an administration which is going to put ‘America first’ and it is not difficult to accept some further strengthening in the US dollar.
While there is unlikely to be a change in the narrative before until the early part of next year, we must be aware that the US dollar versus the euro is now moving into territory we have not seen since the height of the Ukraine conflict in the middle of 2022. The US dollar may have a bit more momentum in it, but it is moving to extreme levels.