Dollar strengthens, yen and gold supported by geopolitical risk

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The dollar continued its run on Tuesday, driven by Donald Trump's inflationary policy outlook, while other safe havens such as gold and yen are taking advantage of market fears about geopolitics. 

At around 10:10 GMT (11:10 in Paris), the American currency climbed 0.44% against the euro, to 1.0552 dollars, and advanced 0.34% against the pound, to 1.2634 dollars. 

After a slight decline the day before, the greenback is gaining momentum again on Tuesday, as the probability of a rate cut by the Federal Reserve (Fed) at its next meeting on December 17 and 18 is diminishing, underlines Patrick Munnelly, of Tickmill. 

“The markets view the fiscal spending planned” by President-elect Donald Trump, namely “higher customs duties and the tightening of immigration, as inflationary,” notes the analyst. 

These policies “could thus hamper the Fed's rate cuts at a time when a series of solid economic data is already restricting the room for maneuver” of the American central bank. 

In the euro zone, inflation was displayed Tuesday at 2% over a year in October, in line with expectations, which did not hinder the fall of the euro. 

In geopolitical news, Russian President Vladimir Putin signed on Tuesday, on the thousandth day of his offensive against Ukraine, the decree expanding the possibilities of using nuclear weapons. 

This signing comes just after the United States authorized kyiv to strike Russian soil with its long-range missiles. 

Like the yen, gold “is riding the wave of geopolitical anxiety”, especially as “the specter of a trade war” looms, which could be triggered by the introduction of new customs duties against the United States, underlines Stephen Innes, analyst at SPI AM. 

On Tuesday, gold gained 0.86% to $2,634.40 l'ounce. 

 

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