Dollar slips lower after Fed rate cut; euro set for weekly gains
The U.S. dollar retreated Thursday after the Federal Reserve cut interest rates at the conclusion of its final policy meeting of the year, and signaled the likelihood of more easing next year.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 98.682, after earlier falling to its lowest since late October.
Dollar slips after Fed meeting
The U.S. central bank lowered rates by 25 basis points at the conclusion of its two-day policy meeting on Wednesday, as expected, marking its third reduction this cycle, but remarks from Chair Jerome Powell at his post-meeting press conference were more balanced and less hawkish than many had anticipated.
The Fed policymakers also forecast another rate cut next year, even with members of the central bank showing divisions over December’s move.
“Current Fed members suggest just one further cut is their 2026 central projection, but with changes coming and the jobs market cooling the risks are skewed towards them cutting by more,” analysts at ING including James Knightley and Padhraic Garvey said in a note.
The delayed November jobs report is due next week, while much attention is now swirling around President Donald Trump’s pick to replace Powell after his term at the head of the Fed finishes in May.
The frontrunner is reportedly White House economic adviser Kevin Hassett, who has called for a more rapid pace of rate cuts, but whether he can persuade sufficient of the policymakers to his, and Trump’s, point of view remains to be seen.
Euro set for weekly gains
In Europe, EUR/USD slipped 0.1% lower to 1.1689, but the single currency is still poised to register weekly and monthly gains amid signs of economic recovery in the eurozone.
“An additional ECB rate cut has now been priced out, but it may be far too early for the market to have the confidence to price in 2026 ECB rate hikes,” said ING.
“Expect EUR/USD to consolidate in the high 1.16s, and a move to our 1.1800 year-end target will probably take some soft US jobs data next week or some important positive growth forecast revisions from the ECB next week.”
GBP/USD dropped 0.2% to 1.3357, while USD/CHF slipped 0.1% to 0.7995 after the Swiss National Bank kept interest rates unchanged at 0.0% earlier in the session, as widely expected.
Australian employment falls
In Asia, AUD/USD slipped 0.4% to 0.6647, after the Australian Bureau of Statistics reported a decline in employment by 21,000, with full-time positions dropping sharply, even as the unemployment rate held steady at 4.3%.
The unexpected weakness complicates the Reserve Bank of Australia’s case for a near-term rate hike, given the persistent inflationary pressures.
USD/CNY traded 0.1% lower to 7.0574, while USD/JPY slipped 0.1% to 155.83 as both currencies benefited from dollar weakness.
Source: Reuters.com
