The USD continues to fluctuate near a 5-week low against a basket of major currencies, as investors are almost certain that the US Federal Reserve (Fed) will cut interest rates at the meeting on December 9-10.
According to analysts, the possibility of the Fed cutting 0.25 percentage points has been almost completely reflected by the market. What investors are interested in right now is a signal of the next level of easing in 2026.
The USD Index, which measures the strength of the greenback against six major currencies, moved sideways at 99.065 in the early trading session in Asia. The index had previously fallen to 98.765 - a five-week low - and is heading for a 0.4% weekly decline.
Data from LSEG shows that the market is valuing up to 86% of the possibility of the Fed cutting interest rates next week, and expects 2-3 more cuts next year.
The Fed is closely monitoring labor market developments to assess the necessity of policy easing. The latest report shows that the number of first-time unemployment claims in the US fell to a 3-year low, although data may be affected by the Thanksgiving holiday.
Meanwhile, some other economic data is still disrupted by prolonged US government shutdowns, causing some reports to be delayed or not fully collected.
According to tradition, the November jobs report was scheduled to be released on Friday, but it has been postponed. However, investors will still pay attention to the personal consumption expenditure (PCE) price index - the Fed's preferred inflation measure - released on the same day, although the data is only for September.
CSEG surveyed economists forecast core PCE to increase by 0.2% compared to the previous month. Ms. Carol Kong, currency strategist at Commonwealth Bank of Australia, commented:
If core PCE rises just 0.2% or less, it will strengthen the likelihood of a Fed rate cut next week. Our analysis shows that the main risk is an increase of only about 0.1%".
In the currency market, the USD moved sideways at 155.18 yen, the Euro was stable around 1.1647 USD, while the British fund held at 1.3326 USD after a slight decrease from the 6-week peak.
The greenback continues to be under pressure as investors consider the possibility that White House economic advisor Kevin Hassett could replace Jerome Powell as Fed Chairman after his current term ends in May. Mr. Hassett is said to support a strong interest rate cut policy.
Next week, the global market will welcome a series of monetary policy decisions from major central banks: Reserve Bank of Australia (Tuesday), Bank of Canada (Thursday) and the Swiss National Bank (Thursday). The following week was the turn of the ECB, the BoE, the Swedish Riksbank and the BoJ.
Three Japanese government officials told Reuters that the Bank of Japan (BoJ) is likely to raise interest rates this month, although the prospects for that time are still unclear - as the market only has a chance to bet on another rate hike next year, and about a 50% chance of another.
The AUD moved sideways at $0.6609 after hitting a two-month peak of $0.6624 on Thursday.
The CAD was steady at 1.3961 CAD/USD, while the Swiss French market stood at 0.8035 USD, down slightly from the two-week peak of 0.7992 USD/tael in the previous session.
