The U.S. dollar hovered near a three-week high against major currencies on Monday, as investors braced for a pivotal week of central bank meetings. Meanwhile, Bitcoin soared to a historic high above $106,000, fueled by indications that President-elect Donald Trump may pursue a U.S. strategic bitcoin reserve.
The U.S. dollar index (DXY), which measures the greenback’s value against six major peers, rose 0.1% to 106.98 by midday European trading, after reaching a peak of 107.18 on Friday, its strongest since November 26. Traders widely anticipate a quarter-point rate cut from the Federal Reserve on Wednesday but expect policymakers to signal a measured easing pace for 2025.
Despite persistent inflationary pressures, the Fed is likely to maintain confidence in its disinflationary trajectory. Analysts, however, remain cautious about inflation risks tied to the incoming Trump administration’s potentially expansionary policies.
James Kniveton, Senior FX Dealer at Convera, noted, “The U.S. economy’s resilience amid high interest rates raises concerns of inflation resurging if the economy overheats. Policymakers may stay vigilant, especially with Trump’s policies adding another layer of uncertainty.”
The euro (EURUSD) dipped slightly to $1.0494, extending its weakness after Moody’s downgraded France’s credit rating last Friday. The decline was tempered by a survey showing a slight improvement in eurozone business activity. European Central Bank (ECB) President Christine Lagarde reiterated that further rate cuts will depend on inflation easing towards the 2% target.
The yen (USDJPY) slid further, hitting 153.92, its weakest since November 26. The Japanese currency struggled after reports suggested the Bank of Japan (BOJ) may skip a rate hike at its meeting later this week.
The British pound (GBPUSD) rebounded 0.33% to $1.2650, recovering from Friday’s drop to $1.2607, the lowest since late November. The bounce came after a survey signaled rising prices in Britain, with investors eyeing Thursday’s Bank of England (BoE) policy decision.
Bitcoin Surges to Record High Amid Trump’s Strategic Reserve Plans
Bitcoin (BTCUSD) surged 3.6% to a new all-time high of $106,533 on Monday, propelled by growing optimism over the digital asset’s mainstream adoption. The rally came after Donald Trump revealed in a CNBC interview late last week that he intends to proceed with plans for a U.S. strategic bitcoin reserve, akin to the country’s strategic oil reserve.
Trump’s vision of making the U.S. the “crypto capital of the planet” has resonated strongly with crypto markets. After initial hesitance, investor enthusiasm pushed Bitcoin past the symbolic $105,000 mark.
Tony Sycamore, an analyst at IG, remarked, “The interview took time to gain traction, but it’s now driven Bitcoin into blue-sky territory. The market will be targeting the next psychological level of $110,000.”
As Bitcoin hovers near record highs, the broader crypto market remains optimistic about further institutional and regulatory adoption under Trump’s administration.
With the Federal Reserve, Bank of England, and Bank of Japan all set to announce policy decisions this week, investors remain on high alert for any shifts that could impact currencies and cryptocurrency markets alike.
