The US dollar weakened as risk sentiment improved, curbing demand for the safe-haven currency. However, upbeat US economic data and the Federal Reserve’s cautious stance on easing monetary policy provided some support. Mixed signals from Fed officials led to decreased expectations of a December rate cut, further influencing the dollar’s performance.
- The dollar index slipped to around 100, retreating from over five-month highs.
- Stronger risk sentiment curbed demand for the safe-haven currency.
- Upbeat US economic data, such as the ADP report and ISM Services PMI, lent support to the dollar.
- The ongoing government shutdown continues to delay the release of key official data.
- Traders trimmed bets on a December rate cut after mixed signals from Fed officials.
- Markets are now pricing in a 62% chance of a 25 bps rate cut, down from over 90% before last week’s FOMC decision.
- The dollar weakened against all major peers, posting its largest losses versus the euro and yen.
The dollar’s value is influenced by a complex interplay of factors including risk appetite, economic indicators, monetary policy expectations and geopolitical uncertainty. Positive economic data may provide a buffer against further declines, while shifts in expectations regarding interest rate decisions by the Federal Reserve may create volatility and affect its value relative to other currencies.