Trump chaos drives euro to new 30-month high against the US dollar

The euro rose to its highest value against the dollar for two and a half years in morning trading, as the big Trump-driven sell-off in greenback continues.

The euro today rose as high as $1.1869 against the dollar, surpassing its recent highs hit on Monday evening, before dipping. It has not been so valuable in dollar terms since January 2015.

Investors have balked at further political chaos in the White House, which has seen a string of high-profile resignations as well as rebellion from Republican party senators blocking key legislation.

This is has led investors to doubt whether the administration of US President Donald Trump is capable of passing the tax cuts and fiscal stimulus anticipated by US investors.

After Trump's election the dollar surged as investors looked for a big boost to infrastructure and promised tax cuts for business and the rich. However, since peaking at the start of the year the dollar's fall has been precipitous.

The trade-weighted dollar index fell to its lowest in 15 months on Monday, having fallen almost without interruption during July.

Meanwhile the European economy has outperformed expectations, with a string of electoral victories for pro-European politicians boosting optimism further.

The dollar has also been weighed down by a slower expected pace of interest rate hikes by the Federal Reserve. The US central bank has been on a determined path of policy normalisation since the start of the year, but recent weakness in inflation data has weighed on prospects for a further rate hike this year.

Prospects for dollar strength in coming months are likely to be in the hands of the Fed, according to Richard Falkenhall, senior forex strategist, at SEB, the Nordic corporate bank. A move lower for the euro could be triggered by hawkish comments by Fed officials in upcoming speeches before its next meeting in September.

"However, if such remarks are not forthcoming over the next month or so, we would need to postpone our call for the next Fed hike to later this year or even move it into next year," he said.

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