Dec 3 : The dollar headed for its ninth straight decline on Wednesday as merchants ramped up bets on Federal Reserve fee cuts following U.S. financial information and rising expectations for a extra dovish central financial institution.
Fed Governor Christopher Waller stated final week the labour market is weak sufficient to justify one other quarter-point fee lower in December, whereas White House financial adviser Kevin Hassett emerged because the frontrunner to develop into the following Fed chair.
U.S. President Donald Trump stated he could be asserting his decide as Fed chair early in 2026.
“Such an announcement, if it happens this early, will create a ‘shadow Fed chair’ since present Fed Chair Powell’s time period doesn’t finish till May,” stated Kristina Hooper, chief market strategist at Man Group.
“This could complicate the Fed’s ability to communicate monetary policy and could create some confusion for markets at a time when they need clarity,” she added.
However, market participants do not expect the Fed to lose its independence or become less effective in controlling inflation, a scenario that would raise bond risk premiums and could trigger a fresh selloff in U.S. assets.
“The time period premium, the extra compensation that buyers demand to carry a long-term bond as a substitute of a collection of short-term bonds, for the 10-year Treasury yield has remained largely unchanged for the reason that begin of the yr,” noted Atakan Bakiskan, U.S. economist at Berenberg.
“Similarly, long-term inflation expectations stay well-behaved, signalling an eventual return to the two per cent inflation goal,” he argued.
Investors await the ADP National Employment Report and data from the Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) later in the session.
Markets priced in an 89 per cent chance of a rate cut this month on Wednesday, according to the CME Group’s FedWatch tool. The probability was at 30 per cent on November 19.
The dollar index, which measures the U.S. currency against six other units, was 0.37 per cent lower at 98.954, the lowest since October 29.
EURO RISES WITH TALKS OVER UKRAINE IN FOCUS
The euro rose 0.34 per cent to $1.1667, the highest since October 28.
Investors tracked progress in Ukraine peace talks, which could bolster energy security and cut costs. However, Wednesday’s move was largely supported by the U.S. rate outlook.
The Kremlin said on Wednesday that President Vladimir Putin had accepted some U.S. proposals to end the war in Ukraine and rejected others and that Russia was ready to meet U.S. negotiators as many times as it takes to reach an agreement.
Analysts argued the euro could rally further if a ceasefire or full peace agreement is reached, particularly if elevated defense spending, which is expected to support the economy in coming years, remains in place.
Goldman Sachs’ updated analysis confirmed that the European economic upside from a ceasefire is likely to be modest, unless a comprehensive and credible peace agreement can be reached.
BITCOIN EXTENDS REBOUND
Bitcoin, the biggest cryptocurrency by market value, rose to a two-week high of $93,965.64 on Wednesday after a 6 per cent rise in the previous session.
It slumped at the start of December after a woeful November when it fell more than $18,000, its largest dollar loss since May 2021, when a number of cryptocurrencies collapsed.
“Speculation that Kevin Hassett is rising because the main candidate for the following Fed chair is reinforcing that dovish bias, as buyers view him as extra snug with looser monetary situations,” said Joel Kruger, markets strategist at LMAX Group, referring to the primary driver supporting crypto currencies.
YEN NOT FAR FROM DANGER ZONE FOR INTERVENTION
The dollar dropped 0.32 per cent to 155.39 against the Japanese yen on Wednesday after rising 0.25 per cent to 155.89 the day before as Bank of Japan Governor Kazuo Ueda provided the strongest signal yet of a rate hike later this month.
“The preliminary value motion casts some doubt on whether or not an earlier BOJ fee hike shall be adequate by itself to reverse the yen weakening pattern that has been in place since Sanae Takaichi gained the Liberal Democratic Party (LDP) management election in early October,” said Lee Hardman, senior currency economist at MUFG.
Prime Minister Takaichi is expected to favour an expansionary fiscal policy and lower rates.
“It should still require intervention if the yen continues to weaken,” MUFG’s Hardman added.
Analysts stated Washington is more likely to push again towards any yen slide to or past 160.00, making intervention doubtless round that stage, whereas noting U.S. Treasury Secretary Scott Bessent has repeatedly blamed BOJ coverage for maintaining the foreign money undervalued.