The U.S. dollar hovered near a five-week low against major currencies on Friday as investors prepared for an anticipated Federal Reserve interest rate cut next week.
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Markets widely expect the Federal Open Market Committee (FOMC) to deliver a 25-basis-point reduction at its December 9–10 meeting, with attention now shifting to any signals about the pace of additional easing in 2025.
The dollar index, which tracks the greenback against six major peers, was flat at 99.065 in early Asian trading. Although a small gain overnight ended a nine-day losing streak, the index had slipped to a five-week low of 98.765 during the previous session and remains on track for a 0.4% weekly decline.
According to LSEG data, traders are pricing in an 86% chance of a rate cut on Wednesday, along with expectations of two to three additional reductions next year.
Fed policymakers have been closely monitoring labour market conditions to assess whether further support is needed. Weekly U.S. jobless claims fell to their lowest level in more than three years, though analysts caution the figures may have been distorted by the Thanksgiving holiday.
The economic picture remains blurred following the record-long government shutdown, which delayed key data releases and resulted in some information never being collected. Monthly nonfarm payrolls, typically released on the first Friday of the month, have been postponed, and the prior month’s report was not published.
However, one of the Fed’s preferred inflation indicators — the core PCE deflator — is due later Friday, though the reading covers September. Economists expect a 0.2% monthly rise. “A 0.2% or lower increase will encourage the FOMC to cut rates next week,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia. She added that the risk points toward a softer 0.1% rise.
Against the yen, the dollar held steady at 155.18. The euro was unchanged at $1.1647, while sterling traded flat at $1.3326 after easing from Wednesday’s six-week high.
The dollar has also faced pressure amid speculation that White House economic adviser Kevin Hassett could replace Jerome Powell as Fed Chair when his term ends in May — a move markets believe would favor further rate cuts.
A busy stretch of central bank decisions lies ahead. Next week brings meetings from the Reserve Bank of Australia on Tuesday, the Bank of Canada on Wednesday and the Swiss National Bank on Thursday. The following week will see policy announcements from the European Central Bank, Bank of England, Sweden’s Riksbank and the Bank of Japan.
Three Japanese government officials told Reuters the BOJ is likely to raise rates this month, though its long-term policy path remains unclear. Markets are pricing in one full rate hike next year and about a 50% chance of another.
The Australian dollar was steady at $0.6609 after touching a two-month high on Thursday. Canada’s loonie traded at C$1.3961 per U.S. dollar, while the Swiss franc held at 0.8035 per dollar after retreating from Wednesday’s two-week peak.
