Highlights:
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Dollar softens as probability of a December Fed rate cut rises to 69%.
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Mixed Fed comments and upcoming PPI data drive short-term uncertainty.
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Consumer sentiment improves as inflation expectations ease.
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GBP/USD and EUR/USD hold key support levels as Dollar momentum slows.
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Global stocks recover on expectations of easier US monetary policy.
The Dollar eased on Monday after a strong run-up last week, as traders increased their expectations that the Federal Reserve may cut interest rates in December. The shift marked a pause in the Dollar’s recent momentum and reflected broader adjustments across global currency markets.
The Swiss franc weakened more than 0.5 percent against the Dollar after former President Donald Trump imposed significant tariffs on Switzerland as part of his trade policy overhaul. The Dollar’s earlier strength and subsequent pullback were key drivers of Monday’s currency moves.
Global stocks also advanced, supported by growing expectations that the Fed is preparing for a rate cut. These gains helped offset recent concerns around high technology valuations that have been contributing to market volatility this month.
Dollar Outlook Linked to Fed Signals and PPI Release
Market participants are now focused on a busy week of economic indicators, including US retail sales and the producer price index. These data points are expected to influence the Fed’s near-term policy stance and by extension, the Dollar’s direction.
Traders are also watching the UK closely ahead of British finance minister Rachel Reeves’ upcoming budget announcement on Wednesday. The potential for fiscal policy adjustments has added to currency market positioning around GBP/USD.
Geopolitical events continue to shape broader trading conditions. The US and Ukraine have been discussing an updated proposal aimed at ending the conflict with Russia, after modifying an earlier plan viewed by Kyiv and European allies as overly favorable to Moscow. The prospect of a negotiated outcome weighed on oil prices, as an easing of sanctions could increase Russian supply.
European stocks rose in early trading, following Wall Street’s rebound on Friday. However, gains slowed by midday as declines in defense stocks limited the broader recovery. The STOXX 600 traded marginally higher after ending last week down 2.2 percent.
Dollar Reacts to Fed Remarks and Rate-Cut Expectations
Recent comments from Federal Reserve policymakers contributed to Monday’s Dollar pullback. On Friday, Fed official John Williams said interest rates could fall “in the near term,” reinforcing expectations of a December reduction.
Goldman Sachs chief economist Jan Hatzius echoed this outlook, stating:
“We expect another Fed cut in December, followed by two more moves in March and June 2026 that take the funds rate to 3-3.25 per cent.”
He added:
“The risks for next year are tilted towards more cuts, as the news on underlying inflation has been favourable and the deterioration in the job market … might be difficult to contain via the modest cyclical growth acceleration we expect.”
Fed funds futures now price in roughly a 65 percent chance of a 25-basis-point cut next month—one of the key drivers behind the softer Dollar.
Dollar Uncertainty Builds Amid Data Gaps
A recent US government shutdown interrupted several essential data releases, complicating the Fed’s assessment of the economy. The Bureau of Labor Statistics confirmed that it canceled the October consumer price report due to incomplete data collection during the shutdown.
Paolo Zanghieri of Generali Investments noted that markets may be overestimating the scope of 2026 cuts:
“We see the chance of a cut next month as 50/50.”
He continued:
“Given limited new data, it would be reasonable for the Fed to wait until January, while signalling an easing bias.”
And further added:
“More importantly, market expectations for nearly four cuts next year, based on hopes for rapid disinflation, appear too optimistic. We expect only 50 basis points of easing by summer.”
Dollar-Yen Pair Near 10-Month Extremes
The Dollar gained 0.3 percent against the yen, reaching 156.81. The yen has fallen about 1.8 percent in November, making it the weakest major currency this month against the Dollar. Concerns about Japan’s fiscal position and low interest rates have added pressure to the currency.
Japanese authorities continue monitoring the rapid movement. Finance Minister Satsuki Katayama increased verbal support for the yen last week, providing temporary stability.
