Dollar Set for Second Weekly Decline
The dollar index is set for a second weekly decline, influenced by expectations of Federal Reserve interest rate cuts. Markets anticipate a 25 bps cut next week and further reductions next year. Potential changes in Fed leadership and recent economic data, including low jobless claims and high layoffs, also impact the currency. Investors await key inflation and consumer spending data.
The dollar index held around 99 on Friday but was still poised for a second straight weekly decline, weighed down by bets on Federal Reserve interest rate cuts.
Markets are currently pricing in an 87% chance that the Fed will deliver a 25 bps rate cut next week, with 2–3 more reductions seen for next year.
Prospects that economic adviser Kevin Hassett could replace Fed Chair Powell in May, a move that may signal a shift toward more aggressive policy easing, also pressured the currency.
Data released Thursday showed initial jobless claims fell to a more than three-year low last week, though the figures were affected by the typically volatile Thanksgiving period.
Meanwhile, the Challenger report indicated layoffs rose to 71,321 in November, the highest for that month since 2022.
Looking ahead, investors await delayed September data on the personal consumption expenditures index, the Fed’s preferred inflation gauge, alongside figures on consumer spending and incomes.
