Dollar Eases as Fed Signals Ongoing Easing Path; Euro Poised for Weekly Advance

Key Moments

Fed Cut Weighs on Dollar

Investing.com – The U.S. dollar slipped on Thursday after the Federal Reserve reduced interest rates at the close of its final policy meeting of the year and indicated that additional monetary easing is likely next year.

At 04:25 ET (09:25 GMT), the Dollar Index, which measures the U.S. currency against six major peers, was down 0.1% at 98.682, having earlier dropped to its lowest level since late October.

The Fed lowered its benchmark rate by 25 basis points at the end of its two-day meeting on Wednesday, in line with expectations and marking the third cut in the current easing phase. Comments from Fed Chair Jerome Powell during the post-meeting press conference were interpreted as more balanced and less hawkish than investors had expected.

Policymakers also projected one additional rate cut next year, even as there were divisions among officials regarding the December decision.

“Current Fed members suggest just one further cut is their 2026 central projection, but with changes coming and the jobs market cooling the risks are skewed towards them cutting by more,” analysts at ING including James Knightley and Padhraic Garvey said in a note.

The release of the delayed November U.S. jobs report is scheduled for next week, drawing heightened market attention. Investors are also closely watching developments around President Donald Trump’s selection of a successor to Powell when his term as Fed chair ends in May.

According to reports, White House economic adviser Kevin Hassett is currently seen as the leading contender. Hassett has advocated for a faster pace of rate reductions, but it remains uncertain whether he will be able to gather sufficient support among policymakers for his and Trump’s stance.

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Major FX Moves in Europe

In Europe, EUR/USD edged down 0.1% to 1.1689. Despite the modest pullback, the euro is still on course to post gains for both the week and the month, supported by signs of recovery in the eurozone economy.

“An additional ECB rate cut has now been priced out, but it may be far too early for the market to have the confidence to price in 2026 ECB rate hikes,” said ING.

“Expect EUR/USD to consolidate in the high 1.16s, and a move to our 1.1800 year-end target will probably take some soft US jobs data next week or some important positive growth forecast revisions from the ECB next week.”

Elsewhere in Europe, GBP/USD fell 0.2% to 1.3357. USD/CHF declined 0.1% to 0.7995 after the Swiss National Bank left its key interest rate unchanged at 0.0% earlier in the session, in line with expectations.

Asia-Pacific FX: Australian Labor Data Pressures AUD

In Asia, AUD/USD dropped 0.4% to 0.6647 after data from the Australian Bureau of Statistics showed that total employment fell by 21,000, with a notable decline in full-time jobs, even as the unemployment rate remained unchanged at 4.3%.

The weaker-than-anticipated labor figures complicate the Reserve Bank of Australia’s case for a near-term interest rate increase, despite ongoing inflation pressures.

USD/CNY was 0.1% lower at 7.0574, while USD/JPY eased 0.1% to 155.83, with both the Chinese yuan and the Japanese yen benefiting from broad U.S. dollar softness.