The US dollar incurred further sharp losses on Wednesday and slumped to its lowest level in nearly four months amid uncertainty over US growth prospects. The dollar index that measures the greenback against a basket of currencies is quoting around November 2024 lows of 104.85, down 0.80% on the day. Investors are building on doubts that Trump tariffs will slow down US economic growth rather than being pro-growth and inflationary for the economy, which they had projected earlier. Moreover, loses in the dollar were accentuated by sharp surge in Euro amid expectations that increased defense spending and borrowing in Europe will help revive the struggling Eurozone economy. European Union chief Ursula von der Leyen on Tuesday unveiled a five-part plan to mobilize 800 billion euros for Europe's defense and deliver immediate military support to Ukraine following the suspension of US aid. Meanwhile, British pound also strengthened from expectations that UK interest rates will stay higher for longer, with traders reducing bets on Bank of England rate cuts to 52 basis points for 2025. BoE Deputy Governor Ramsden had warned that persistent wage pressures could keep inflation elevated but suggested future rate cuts could accelerate if needed. Currently, EURUSD and GBPUSD pairs are quoting at their year to date high of $1.0724 and $1.2843 respectively.
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