Dollar still on the downside but close to 14-year peak

Investing.com – The dollar remained on the downside but was still hovering within close distance of a 14-year high against the other majors currencies on Tuesday, as investors remained optimistic regarding the U.S. economy following the election of Donald Trump as U.S. president.

EUR/USD climbed 0.57% to 1.0797, off Monday’s 10-month trough of 1.0706.

The dollar remained broadly supported amid hopes that increased fiscal spending and tax cuts under a Trump administration will bolster economic growth and inflation.

Expectations for higher U.S. interest rates also remained intact amid optimism that a pick-up in growth will allow the Federal Reserve to tighten borrowing costs.

Earlier Tuesday, preliminary data showed that German gross domestic product rose .2% in the third quarter, disappointing expectations for an incease of 0.3% and down from a growth rate of 0.4% in the previous quarter.

A separate report showed that the ZEW economic sentiment index for Germany rose to 13.8 this month from October’s reading of 6.2. Analysts had expected the index to increase to 8.1 in October.

Elsewhere, GBP/USD dropped 0.54% to 1.2429 after the U.K. Office for National Statistics reported that the consumer price index rose 0.1% in October, compared to expectations for a 0.3% gain.

Year-on-year, consumer prices rose 0.9% last month, below forecasts for a gain of 1.1%.

USD/JPY slipped 0.21% to 108.16, just off the previous session’s five-month high of 108.55, while USD/CHF fell 0.28% to 0.9948.

The Australian and New Zealand dollars were steady, with AUD/USD at 0.7556 and with NZD/USD at 0.7114.

Also Tuesday, the minutes of the Reserve bank of Australia’s November meeting mentioned that underlying inflation is expected to return to normal levels over time and that the Australian economy is seen growing close to potential over the next few quarters, before picking up further.

Meanwhile, USD/CAD edged down 0.26% to trade at 1.3527, not far from Monday’s nine-month peak of 1.3589.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.33% at 99.71.

On Monday, the index hit highs of 100.24, a level not seen since December 2015 and if it rises above the highs of 100.51 set in December 2015, it would reach its highest level since April 2003.