US Dollar Weakens as Markets Open in Holiday-Shortened Week
The US Dollar (USD) Index opened with a bearish gap on Monday, following a positive close last week. The European economic docket will feature the IFO business sentiment survey from Germany, while the US will release the Chicago Fed National Activity Index and Dallas Fed Manufacturing Business Index later in the day, which could provide new market drivers.
A sharp decline in US Treasury bond yields occurred after news broke of Donald Trump selecting fund manager Scott Bessent as the US Treasury Secretary. This news put pressure on the USD, with the benchmark 10-year US Treasury yield dropping by more than 1.5% to below 4.35%, and the USD Index losing 0.55%, falling to 106.90.
US stock index futures rose between 0.6% and 0.4%, reflecting a shift in sentiment. Stephen Spratt, a strategist at Societe Generale, noted that markets viewed Bessent's appointment as a "safe hands" choice, easing concerns over a more unconventional pick, especially with Bessent's stance on restraining US borrowing.
The EUR/USD pair benefitted from USD weakness, rising around 1.0500 after losing over 1% for the third consecutive week. GBP/USD also started the week higher, trading at approximately 1.2600, up more than 0.5%. Bank of England Deputy Governor Clare Lombardelli and MPC member Swati Dhingra are expected to speak later in the day.
Gold, which rose nearly 2% last week, saw a sharp decline on Monday, trading below $2,670, down 1.8%. Despite the USD’s weakness, the USD/JPY pair saw limited losses, with the pair trading down 0.3% at around 154.30 as the Japanese Yen struggled to act as a safe-haven asset.
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