Dollar remains under pressure on growing Fed cut expectations
The U.S. dollar edged higher Tuesday, but remained under pressure with the Federal Reserve widely expected to cut interest rates at its policy meeting later this month.
At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 99.422, after falling for a seventh consecutive session to hit a two-week low on Monday.
Growing expectations of Fed rate cut
Data released on Monday showed U.S. manufacturing contracted for the ninth straight month in November, another indication that the U.S. economy is struggling as the year comes to an end.
Fed funds futures are pricing in an implied 88% probability of a 25-basis-point cut at the U.S. central bank’s next meeting on December 10, compared to a 63% chance a month ago, according to the CME Group’s FedWatch tool.
“We expect that the remainder of the week will validate the market’s dovish pricing for next week’s Fed meeting,” said analysts at ING, in a note.
Traders are also looking for the confirmation of a successor to Chair Jerome Powell, following a report that White House economic adviser Kevin Hassett has emerged as the frontrunner.
U.S. Treasury Secretary Scott Bessent said there was a good chance President Donald Trump would announce his pick before Christmas.
Eurozone flash inflation due
In Europe, EUR/USD edged marginally lower to 1.1607, as talks to end the war in Ukraine continued, with the U.S. special envoy Steve Witkoff heading to Moscow to discuss matters with the Kremlin.
Flash inflation data for the eurozone, due later in the session, is expected to show annual inflation just above the European Central Bank’s medium-term target, though this is unlikely to shift the rates outlook much because markets expect the ECB to stay on hold through 2026.
“The risks are slightly on the downside for the euro, but our expectation is for a neutral FX impact nonetheless and EUR/USD can eye 1.170 again soon if USD drops in line with our call,” ING added.
GBP/USD edged marginally lower to 1.3213, but near its highest levels in a month.
The head of Britain’s fiscal watchdog resigned on Monday after the agency inadvertently released key details of the government’s annual tax and spending budget last week before finance minister Rachel Reeves announced them in parliament.
USD/JPY bounces
In Asia, USD/JPY gained 0.3% to 155.94, with the pair bouncing after dropping 0.5% overnight following hawkish signals from Bank of Japan Governor Kazuo Ueda.
Speaking over the weekend, Ueda suggested the central bank could consider raising rates as early as this month, lifting Japanese Government Bond yields to record highs.
The 30‑year JGB yield climbed above 1.9%, marking a multi‑decade peak, while the 10‑year yield neared 1.88%.
USD/CNY traded marginally lower to 7.0700, while AUD/USD gained 0.1% to 0.6553.
Source : Investing.com
