The euro has achieved its longest winning streak against the US dollar in over 20 years, and options traders are wagering that this rally is far from over. Earlier in the session, the euro reached its highest level since September 2021, before facing pressure from a greenback recovery, which tempered its advance. The current streak is the longest since 2004 and has only been exceeded twice since the currency’s introduction in 1999.
The Bloomberg Dollar Spot Index saw a session high following the US Senate’s passage of Donald Trump’s $US3.3 trillion tax and spending cut bill. This gain occurred as the initial US labor market report of the week did not provide immediate support for a Federal Reserve interest-rate cut in the coming month. The index later showed slightly weaker trading.
According to Win Thin, global head of markets strategy at Brown Brothers Harriman, the initial market response was to purchase the dollar due to reduced uncertainty regarding fiscal policy. However, Thin suggests that implementing significant tax cuts will eventually increase the budget deficit, which is ultimately a negative factor for the dollar.
