The USD fell sharply on the morning of December 11 after the US Federal Reserve (Fed) signaled a more supple signal than expected, causing investors to sell heavily and bet on two more interest rate cuts in 2026.
According to Reuters, at the recently concluded two-day policy meeting, the Fed cut interest rates by another 0.25 percentage points, in line with analysts' forecasts. However, what surprised the market was Chairman Jerome Powell's statement, when he said that inflation tends to "come back clearly" and left open the possibility of stronger easing if economic conditions allowed.
Nick Rees - Director of Macro Research at Monex Europe commented: "The noteworthy point is the more dovish stance in Chairman Powell's statement and speech. This is completely different from the tough tone that the market witnessed at the October meeting.
Responding to that signal, investors simultaneously sold the USD, causing the currency to fall to its lowest level since October 21, to only 98.537 points when measured in a basket of major currencies. The euro rose above $1.17, approaching a two-month high of $1.1707 in the morning session on December 12 in Asia.
The British pound hit a 1.5-month peak of 1.3391 USD, while the Japanese yen increased by 0.25%, to 155.64 JPY/USD reflecting capital flow returning to safe-haven assets after the Fed's easing signal.
While the US dollar has fallen, sentiment in global financial markets has become more cautious. US technology stocks fell sharply after Oracle's unsatisfactory profit report, raising concerns about the real profitability of the artificial intelligence (AI) sector, which is considered the main growth driver of the market this year.
This weakens global risk sentiment, causing the AUD to fall 0.5% to $0.6643 due to weaker-than-expected pressures from the jobs report in Australia. The NZD also fell 0.3% to $0.5799, down from a multi-month high in the previous session.
In the cryptocurrency market, Bitcoin decreased by 3%, down to below 90,000 USD, while ether lost nearly 5%, and 3,176.86 USD reflected the downward trend of investor risk appetite after the Fed's policy signal and the decline of AI stocks.
