Market conditions show a dollar index that has steadied around 99.6 on Friday, halting a recent slide, yet is poised to finish the month largely unchanged. However, the index experienced a weekly decline of about 0.5% as investors anticipate further Federal Reserve rate cuts. Safe-haven demand for the dollar has eased as well.
- The dollar index steadied around 99.6.
- The index is on track to finish the month largely unchanged.
- The index fell about 0.5% for the week.
- Markets are pricing in an 87% chance of a 25 basis point cut in December.
- Three additional rate reductions are expected next year.
- Kevin Hassett is the leading candidate for the next Fed chair, which is seen as favoring lower rates.
- Safe-haven demand for the dollar eased due to potential Ukraine peace deal talks.
- The dollar was set to post its largest weekly decline against the kiwi.
- The Reserve Bank of New Zealand signaled an end to its current easing cycle.
This data suggests the dollar’s near-term performance is influenced by expectations of Federal Reserve rate cuts, with the potential for a weaker dollar as those cuts are priced in. The possibility of a new Fed chair who aligns with lower rate preferences further reinforces this outlook. Additionally, reduced safe-haven demand linked to geopolitical developments may contribute to downward pressure on the dollar. However, the currency’s performance relative to other currencies is also impacted by the monetary policies of other central banks, as evidenced by its weakening against the New Zealand dollar.