**The Dollar Surges to a Two-Year High Against the Euro and Pound**
The dollar has surged to a two-year high against the euro and an eight-month high against the pound, bolstered by strong US job market data. The strength of the US economy and persistent inflation have led investors to anticipate fewer interest rate cuts by the Federal Reserve, boosting demand for the dollar.
The pound, which was the best-performing G10 currency last year, fell 1.3% against the US dollar to $1.2354, its lowest level since April. The euro fell 0.9% to $1.0267, its lowest level since November 2022.
The strong job market data, which showed new jobless claims fell to an eight-month low last week, has boosted investor confidence in the US economy. The market expects the Federal Reserve to cut interest rates by 0.43 percentage points before the end of 2025.
Currency strategist Kit Juckes at Société Générale noted that the pound took a beating on Thursday, with investors trimming their long positions in the pound. He attributed this to the lack of selling pressure on the US dollar, which has limited the pound’s potential to appreciate.
Other analysts pointed to weak UK and euro zone manufacturing data and the threat of higher gas prices as weighing on the pound and the euro. The closure of Russian gas supplies to EU countries through Ukraine has led to concerns about higher gas prices and tighter energy supplies.
Lee Hardman, currency strategist at Bank of Mitsubishi UFJ, noted that the EU’s reliance on natural gas imports means that higher gas prices will have a negative impact on the region’s industrial sector. However, David Oxley, chief climate and commodities economist at Capital Economics, said that rising gas prices will not have a significant impact on inflation and interest rates.
**FAQ:**
* What has caused the dollar to surge to a two-year high against the euro and pound?
The strong US job market data has boosted investor confidence in the US economy, leading to a surge in demand for the dollar.
* What are the implications for the pound and the euro?
The pound and the euro are likely to continue to weaken against the dollar, with the pound falling to its lowest level since April and the euro falling to its lowest level since November 2022.
* What are the other factors contributing to the weakness in the pound and the euro?
Weak UK and euro zone manufacturing data and the threat of higher gas prices are also contributing to the weakness in the pound and the euro.
* What is the expected impact of higher gas prices on the EU’s industrial sector?
Higher gas prices are likely to have a negative impact on the EU’s industrial sector, as the region relies heavily on natural gas imports.
**Conclusion:**
The strong US job market data has triggered a surge in demand for the dollar, pushing it to a two-year high against the euro and an eight-month high against the pound. The pound and the euro are likely to continue to weaken against the dollar, with the pound falling to its lowest level since April and the euro falling to its lowest level since November 2022. Other factors, including weak UK and euro zone manufacturing data and the threat of higher gas prices, are also contributing to the weakness in the pound and the euro.
