The U.S. dollar was on track for its most significant weekly decline since late July on Friday, as investors grew more confident in the prospect of additional monetary easing by the Federal Reserve in December, compounded by the reduced liquidity from Thursday’s U.S. holiday. An outage caused by a cooling issue at data centres disrupted trading on its popular currency platform as well as in stock and commodity futures. However, trading started to resume at 1200. “We are not expecting any significant impact on the market; perhaps it’s something to monitor just in case. However, we anticipate a relatively calm conclusion to both the month and the week,” stated Lee Hardman.

The dollar index, which assesses the greenback’s strength relative to a group of six major currencies, was recently observed trading up 0.2% at 99.744, regaining some ground. However, five consecutive days of declines position it for its most significant one-week loss since July 21. The probability of a 25-basis-point cut at the Federal Reserve’s upcoming policy meeting on December 10 is currently implied at 87%, as indicated by U.S. Fed funds futures. This marks a significant increase from the 39% chance noted just a week prior, according to the reports. The probability reflected in futures has been increasing since New York Fed president John Williams stated last week that the U.S. central bank might still reduce interest rates “in the near term” without jeopardizing its inflation target.

Hardman stated, “The remarks give us more confidence that they will cut rates, as we have seen in the FX market since then, which has, at least temporarily, put a dampener on the dollar’s uptrend.” In Asia, the Japanese yen experienced volatility following a phase of depreciation. The currency remained steady at 156.2 yen to the dollar, as labor market and inflation data strengthened the argument for monetary tightening in Asia’s second-largest economy. This comes amid ongoing weakness in the currency, which has heightened the possibility of intervention from the Ministry of Finance. In November, consumer prices in Japan increased by 2.8% compared to the previous year, surpassing economists’ expectations and exceeding the Bank of Japan’s 2% target. This is Sectors Up Close, and our focus today is on healthcare. “The yen has somewhat stabilised at weaker levels this week, which has alleviated pressure on Japan to intervene and support the currency,” Hardman stated. Hardman indicated that the remarks from the Japanese government last week served as a signal that should the yen persist in its decline, the BOJ would expedite its plans to reinstate rate hikes.

In other developments, the euro was recently down 0.3% at $1.1558 against the dollar, yet it remains up approximately 0.5% for the week, poised for its largest weekly increase since July, in light of discussions regarding a U.S.-supported initiative to resolve the Russia-Ukraine conflict. “While there is considerable caution in markets about the prospects of a peace deal, any material progress from here should weigh on the dollar and support high-beta European currencies,” stated Francesco Pesole. Sterling declined 0.2% to $1.3206 today, yet it is on track for its strongest weekly performance since early August, following the unveiling of the much-anticipated budget by British finance minister Rachel Reeves earlier this week. Reeves responded on Thursday to the criticism surrounding the government’s spending strategies, which aim to support increased welfare expenditures by elevating the nation’s tax obligations to levels not seen since the post-World War Two era.