The dollar fell for a ninth consecutive session on Wednesday as traders strengthened their bets on a Federal Reserve rate cut, driven by softer US economic data and growing expectations of a more dovish stance from the central bank.
Fed Governor Christopher Waller said last week that the labor market had weakened enough to justify another quarter-point cut in December, while Kevin Hassett — a senior White House economic adviser — has emerged as the leading contender to become the next Fed Chair.
President Donald Trump said he will announce his choice for Fed Chair in early 2026.
Christina Hooper, chief market strategist at Man Group, noted: “Such an early announcement would effectively create a ‘shadow Fed Chair,’ given that Jerome Powell’s term doesn’t end until May.”
She added: “This could complicate the Fed’s communication on monetary policy and create confusion in markets at a time when clarity is most needed.”
According to CME’s FedWatch tool, markets have now priced in an 87% chance of a December rate cut, up sharply from just 30% on November 19.
With December largely priced in, investor focus is shifting toward the Fed’s path beyond the upcoming meeting, with markets expecting around 88 basis points of easing by December 2026.
The US Dollar Index slipped 0.15% to 99.10, moving toward an annual decline of nearly 9%.
Euro rises as attention turns to Ukraine peace talks
The euro edged up 0.11% to $1.1639, with investors monitoring progress in Ukraine peace negotiations — developments that could strengthen Europe’s energy security and lower costs, potentially supporting the single currency.
However, the Kremlin said Wednesday that Russia and the United States have not reached any settlement on a potential peace agreement, following a five-hour meeting between President Vladimir Putin and senior envoys of President Trump.
Analysts believe the euro could see further gains if a ceasefire or comprehensive peace deal emerges, particularly if elevated defense spending continues to support economic activity in the coming years.
Eurozone inflation data came in slightly above expectations on Tuesday, but market pricing for the ECB remained unchanged, with expectations that the central bank will hold rates steady until early 2027.
Yen hovers near intervention zone
The dollar slipped 0.13% to ¥155.69 on Wednesday after touching ¥155.89 the previous day, as Bank of Japan Governor Kazuo Ueda delivered his strongest indication yet that a rate hike may be considered later this month.
Lee Hardman, senior currency economist at MUFG, said: “The initial market reaction raises doubts about whether an early rate hike by the Bank of Japan will be enough on its own to reverse the yen’s persistent weakness since Sanae Takaichi became LDP leader in early October.”
Takaichi is expected to favor expansionary fiscal policy and lower borrowing costs.
Analysts also noted that Washington is likely to push back against the yen sliding to ¥160 or beyond, implying intervention becomes increasingly probable at that level. US Treasury Secretary Scott Bessent has repeatedly blamed Japan’s ultra-loose policies for keeping the yen undervalued.
Australian dollar climbs… and Bitcoin rebounds
In Asia, the Australian dollar rose to its highest level since October 30 at $0.6584 after GDP data came in slightly below forecasts. The Reserve Bank of Australia is widely expected to keep rates unchanged next week.
A major move came from India, where the rupee broke beyond 90 per US dollar amid pressure from weak trade flows and portfolio outflows, despite strong economic growth in the world’s fifth-largest economy.
A sharp rebound in Bitcoin helped revive risk appetite. The world’s largest cryptocurrency rose 2% on Wednesday to a two-week high of $93,633.70, after jumping 6% in the previous session.
Bitcoin had slumped earlier in December after a difficult November, during which it lost more than $18,000 — its biggest dollar decline since May 2021, when several major cryptocurrencies crashed.
