The US Dollar remained steady near a five-week low after weak US economic data appeared to strengthen expectations of a Federal Reserve rate cut next week, benefiting the Yen and lifting the Euro to nearly a seven-week high.
Investors are also considering the possibility of White House economic adviser Kevin Hassett succeeding Jerome Powell as Fed Chair when his term ends in May, with Hassett anticipated to advocate for further rate reductions.
US President Donald Trump announced this week that he will reveal his choice to succeed Jerome Powell as Fed Chair early next year, prolonging a months-long selection process despite earlier claims of having already made a decision.
Analysts have suggested that appointing Kevin Hassett could put pressure on the Dollar, with bond investors reportedly telling the US Treasury that Hassett might pursue aggressive rate cuts in line with Trump’s preferences, according to the Financial Times.
LSEG data indicates that traders are pricing in an 85% probability of a 25-basis-point rate cut next week.
The Dollar index, which tracks the currency against six major peers, was largely unchanged at 98.94 at the time of writing, after a nine-day decline. It remained near a five-week low and is down almost 9% for the year.
A Reuters survey found that while a significant minority of FX strategists now expect the Dollar to gain strength next year, most continue to forecast a weaker greenback in 2026, driven by anticipated rate cuts.
Furthermore, the Euro slipped slightly by less than 0.1% to $1.1657 but remained near its highest level since 17th October, after data showed eurozone business activity grew at its fastest rate in 30 months in November.
The currency has risen over 12% this year, on track for its biggest annual gain since 2017, supported initially by a weaker Dollar amid earlier tariff uncertainties and more recently by increasing expectations of US rate cuts.
The European Central Bank is set to meet in two weeks and is widely expected to keep rates unchanged, with markets assigning only about a 25% chance of any easing next year.
Elsewhere, the Yen remained flat at 155.22 per Dollar, slightly rebounding from the 10-month low it hit last month amid renewed concerns about potential intervention by Tokyo authorities.
The Bank of Japan is expected to hike rates in December, according to three government sources familiar with the discussions, although the central bank’s plans beyond that remain uncertain, Reuters reports.