The dollar gained ground on Monday (May 22) as markets realised the recent ‘Trump slump’ sell-off was an overreaction given the US economy’s sound fundamentals.
US futures gained slightly as uncertainty over the stability of Trump’s presidency died down.
However, the dollar slipped against the euro, which rose 0.36% to its highest point against the dollar since the autumn after comments from German chancellor Angela Merkel that she believed the euro to be “too weak”.
Sterling slipped back slightly from the $1.30 it hit on Friday (May 19), compounded by fears of a ‘no deal’ Brexit outcome that resurfaced over the weekend.
The pound also slumped below €1.16 in early trading on Monday against the euro, a fall of 0.39% on Friday’s close.
Chris Saint, senior currency analyst at Hargreaves Lansdown, said there had been expectations the Fed would be lifting interest rates gradually in the US in the belief that Trump would forge ahead with his pro-growth agenda.
'US fundamentals sound'
“The underlying fundamentals are still sound, it’s just a question of what’s happened recently, and will that make it much harder for Trump to go ahead with his plans – and what that will mean for US rates rising later this year,” he said.