The US dollar rose in European trade on Monday against a basket of major rivals, hitting four-month highs amid strong demand on the greenback following Donald Trump’s US election win. 

Now markets await important clues and data this week, including US inflation data and speeches by Fed officials, to determine the likely future path of US interest rates.

The Index 

The dollar index rose over 0.5% today to 105.51, the highest since July 3, with a session-low at 104.93.

The index closed up 0.6% on Friday after Donald Trump’s landslide election victory, while rising 0.6% overall last week.

Trump’s Ambitions 

Analysts believe that Donald Trump’s aggressive plans for immigration, tax cuts, and higher tariffs would impose upside pressures on inflation, treasury yields, and the dollar.

JPMorgan’s analysts believe that the Federal Reserve is still expected to cut interest rates by 25 basis points at the December meeting, but it’ll slow down the pace later on to one rate cut per quarter. 

US Rates 

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in December stood at 68.5%, with a 31.5% chance of no changes in policies.

Later this week, Fed Chair Jerome Powell will speak on the battle with inflation and the future of US interest rates.

Gold prices fell in European trade on Monday on track for the second loss in a row, under pressure from the dollar's sharp rise against major rivals.

Now markets await important clues and data this week, including US inflation data and speeches by Fed officials, to determine the likely future path of US interest rates.

Prices

Gold prices fell 0.7% to $2666 an ounce, with a session-high at $2686.

On Friday, gold lost 0.8%, resuming losses and approaching three-week lows at $2643.

The precious metal tumbled 1.9% last week, the second weekly loss in a row, under pressure from the higher dollar and US treasury yields after Donald Trump’s landslide US election victory.

The Dollar

The dollar index rose 0.4% on Monday, extending the gains for the second session and about to hit four-month highs at 105.44 against a basket of major rivals.

The dollar is still carried by the tailwinds following Trump’s US election win, as investors expect positive and stimulating economic policies from Trump. 

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in December stood at 68.5%, with a 31.5% chance of no changes in policies.

Later this week, Fed Chair Jerome Powell will speak on the battle with inflation and the future of US interest rates.

SPDR

Gold holdings at the SPDR Gold Trust fell 3.74 tons on Friday, the fourth decline in a row, reaching a total of 876.85 tons, the lowest since October 4.

Euro fell in European trade on Monday against a basket of major rivals, sharpening losses for the second day against the dollar and plumbing five-month lows amid increasing political uncertainty in Germany, and following suggestions by US President-elect Donald Trump.

Trump has suggested imposing tariffs on all European goods imports, which would threaten a deeper trade war between the EU and the US.

The Price 

The EUR/USD pair fell 0.4% today to $1.0678, the lowest since June 27, with a session-high at $1.0728.

The euro closed down 0.8% on Friday against the dollar following Trump's landslide election win last week.

It also lost 1.1% overall last week against the dollar, the fifth weekly loss in six weeks on concerns about renewed trade tensions between the EU and America.

Political Uncertainty in Germany 

A severe case of uncertainty is permeating the German political landscape, after the governing coalition collapsed after three years in the Parliament, paving the way for early elections.  

Trade Tensions 

Euro is under pressure from US President-elect Donald Trump's vows to impose tariffs on European goods imports, in accordance with his "America First" policy.

This policy of tariffs will no doubt raise pressures on trans-Atlantic relations and could lead to more damaging confrontations.

European Rates

Recent inflation showed consumer prices in the eurozone rose more than expected in October.

Following the data, the odds of an ECB 0.25% interest rate cut in December plunged from 85% to 50%.

Yen fell in Asian trade on Monday against a basket of major rivals, moving in a negative zone against the dollar and resuming losses after a two-day hiatus. 

The decline comes after the Bank of Japan's October meeting minutes, which showed divisions between policymakers on the timing of the next interest rate hike, but they agreed that yen's movements in the forex market will play a role in deciding the timing. 

The Price 

The USD/JPY pair rose 0.65% today to 153.61 yen per dollar, with a session-low at 152.61.

The yen closed up 0.25% on Friday against the dollar, moving away from four-month lows at 154.71 yen.

Yen was boosted as well after Japanese authorities issued a series of warnings about the extreme weakness of the local currency.

The BOJ

The Bank of Japan's latest meeting minutes showed that some members are concerned about uncertainty following the US elections. 

At the October 30-31 meeting, the BOJ maintained interest rates unchanged but said that risks from the US economy have shrunk, showing that the conditions are ripe for another rate hike.

However, the doves at the BOJ advised a slower pace in normalizing monetary policies. 

One of the doves warned that rate hikes could cause disruptions in the markets and impede the long-terem goal of backing away from massive monetary stimulus. 

One member called for consideration of more interest rate hikes, as the Japanese economy no longer requires heavy monetary support.

The minutes also showed that yen's weakness in the forex market has become a headache once more, due to its impact on import prices, especially for fuel and raw material.

Japanese Rates 

A recent Reuters poll showed the majority of economists expect the Bank of Japan to refrain from hiking interest rates in December, with the timing of the hike likely pushed back to March 2025.