The US dollar fell more than 0.25% today, as the USD index fell by 3.5% in January, its biggest monthly decline since March 2016. At the same time, Trump’s first the State of the Union address did not help to push the USD higher again.
In his speech, Trump called on Congress to pass legislation to ensure at least $1.5 trillion in infrastructure spending. The weakness of the US dollar comes in light of market expectations that the Fed will be more confident in the economy but will keep its policy unchanged when the interest rate decision will be taken tonight, which will also be Janet Yellen's last decision as Governor of the Federal Reserve.
The dollar's weakness comes at a time when growth is growing around the world, especially in the euro zone and Japan, and also amid absence of appetite for risk. The eurozone had the fastest pace of growth in a decade in 2017 as the economic sentiment gained its highest level in 17 years.
On the other hand, the Japanese yen fell after the Bank of Japan increased the purchase of medium-term government bonds. This came after the 10-year yield rose to a six-and-a-half-month high of 0.095%. The Bank's policy is to control bond yields to near zero levels.
Sterling fell against the US dollar and the euro as the European Commission rejected the proposal for a free-trade agreement on financial services after Brexit. The pound is still on course to record the strongest rally against the US dollar since July 2010, with a nearly 4.7% gain since the start of the new year amid investor optimism about the UK economy and the Brexit agreement.
