TOKYO- The US dollar hovered close to a five-month low against its major peers on Monday, pressured by President Donald Trump’s erratic trade policies and a run of soft macroeconomic data.
The euro stood not far from a five-month peak after German parties on Friday agreed on a fiscal deal that could boost defense spending and revive growth in Europe’s largest economy.
There have been “two stark shifts in macro markets” over the past month, according to Goldman Sachs analysts Dominic Wilson and Kamakshya Trivedi.
The first is a “sharp re-rating lower” of US assets “on the back of tariff volatility and the environment of broader policy uncertainty created by the new administration”, while the second is a “sharp re-rating higher in the fiscal impulse in Germany”, the analysts wrote in a note to clients.
“Together, these two shifts pose a significant challenge to the narrative of US exceptionalism that has been a dominant market theme,” they said.
The euro was fetching $1.0881, slightly off the $1.0947 level it hit last Tuesday for the first time since October 11.
German Chancellor-in-waiting Friedrich Merz announced on Friday that he had secured the crucial backing of the Greens for a massive increase in state borrowing.
The deal will likely be approved by the outgoing parliament this week. It includes a 500 billion euro ($544 billion) fund for infrastructure and sweeping changes to borrowing rules. Elsewhere, the Japanese yen stuck close to a five-month top, buoyed by hawkish signals from the Bank of Japan, although the central bank is widely expected to retain the status quo in a policy decision on Wednesday.
