- Trump nominated Scott Bessent as the new Treasury Secretary.
- Business activity in the US economy rose in November.
- The pound collapsed after data revealed that business activity in the UK contracted in November.
Most currency futures fell on Friday as the dollar rallied on upbeat business activity data. The trend continued on Monday as dollar bulls applauded Trump’s Treasury Secretary nomination. However, the Canadian dollar traded near a high hit on Friday after upbeat sales data.
Trump nominated Scott Bessent as the new Treasury Secretary. The dollar rose because Scott supports a strong dollar and Trump’s tariff proposals.
US business activity (Source: S&P Global)
Data on Friday revealed that business activity in the US economy rose from the previous month. The composite PMI increased from 54.1 in October to 55.3 in November, indicating a robust economy. As a result, market participants lowered the likelihood of a December Fed rate cut to 52%, boosting the dollar. Meanwhile, currency futures fell. The US economy has shown unexpected resilience, slowly shifting the outlook for rate cuts in 2025 to a gradual one.
Furthermore, Trump’s win increased the likelihood of an inflation spike due to his policy proposals. As a result, policymakers assumed a more cautious tone, with Powell stating there was no hurry to lower borrowing costs. Traders await the FOMC meeting minutes to get more clues on the Fed rate-cut outlook after Trump’s win.
Meanwhile, the pound collapsed after data revealed that business activity in the UK contracted in November. The composite PMI fell from 51.8 to 49.9. Moreover, a separate report showed a bigger-than-expected drop in sales, indicating weak consumer spending. The rapidly declining economy has increased expectations for Bank of England rate cuts in 2025. At the same time, it has dashed hopes for faster economic growth due to the new government budget.
On the other hand, the euro had a similar fate on Friday as business activity in the Eurozone fell sharply. The composite PMI for the bloc came in at 48.1, missing estimates of 50.0. The decline increased pressure on the European Central Bank to deliver another rate cut in December, putting downward pressure on the euro.
The Canadian dollar was an outlier as domestic data showed sales increasing by 0.4%, as expected. Moreover, core retail sales jumped by 0.9%, well above estimates of 0.3%. The upbeat figures lowered the likelihood of another super-sized Bank of Canada rate cut.
