The U.S. dollar strengthened on yesterday, driven by stronger-than-expected job-market data that highlighted a robust labor market in advance of the Federal Reserve’s expected rate cut. Policymakers are likely to focus on inflation risks that may limit additional easing measures. Markets are preparing for additional central bank decisions ahead of the weekend. On Tuesday, the Reserve Bank of Australia maintained its current interest rates and dismissed the possibility of further rate cuts, resulting in an appreciation of the Aussie dollar. The greenback, conversely, continued to strengthen following the release of data indicating a modest rise in U.S. job openings for October, despite hiring levels remaining subdued. According to the report, released on Tuesday, job openings, which serve as an indicator of labor demand, increased by 12,000 to reach 7.670 million by the end of October. According to a survey, economists had projected that there would be 7.150 million unfilled jobs.

The dollar experienced an increase following the report, reaching two-week highs against the yen near 157 yen, and was last noted up 0.6% at 156.845 n. The currency also appreciated against the euro, which decreased by 0.1% to $1.1629. With the data now addressed, the market has shifted its attention back to the Fed. Investors are reassessing their expectations for rate cuts in 2026 amid growing skepticism regarding Kevin Hassett, the leading candidate to replace Jerome Powell, whose eight-year tenure as Fed chair concludes in May, and whether he will be as dovish as anticipated by U.S. President Donald Trump. “There is significant ambiguity regarding the outcomes we can expect tomorrow.” “Rate cuts are pretty much nailed on at this point,” stated Shaun Osborne. “However, in addition to that, there are numerous variables influencing the actions the Fed may take tomorrow.”

There appears to be an anticipation that Powell will aim to establish a relatively high threshold for another rate cut; however, I am uncertain if this will significantly impact the dollar. The U.S. dollar index, which assesses the greenback’s strength relative to a basket of six currencies, increased by 0.1% to reach 99.21. As the markets anticipate a near-certainty of Fed policy easing this week, focus is shifting towards the projections for the upcoming year. “Everyone will be looking at the dot plot,” stated Michael Pfister. “We are observing decision-makers with differing perspectives at this moment,” he stated, noting that if the dot plots are lower than previously, this is likely to be detrimental for the dollar. The “dots” from the September meeting indicate that the Fed resumed its easing cycle with a 25 basis-point cut, projecting a policy rate of 3.6% by the end of 2025, 3.4% at the end of 2026, and 3.1% by the conclusion of 2027. “A hawkish repricing is rolling across curves elsewhere — rate hikes are getting priced in for Australia, Canada, and the euro area in 2026 — so the dollar could come under pressure if Powell fails to out-hawk markets,” said Karl Schamotta.

In other developments, the euro experienced a decline after Monday’s selloff in bund markets. This shift followed remarks from European Central Banks board member Isabel Schnabel, who informed that the bank’s forthcoming action could lean towards an interest rate hike instead of a cut, contrary to some expectations. However, she noted that such a move would not occur in the immediate future. The Australian dollar appreciated 0.3% to US$0.6641 following the central bank’s decision to maintain rates at 3.6% for the third consecutive month, a move that was anticipated. The bank also cautioned that an increase in inflation might prove to be persistent. The gains accelerated following RBA Governor Michele Bullock’s statement in a press conference indicating that additional rate cuts were unnecessary. The yen strengthened earlier in Asia following a significant 7.5-magnitude earthquake that impacted Japan’s northeast overnight. The prevailing risk-averse sentiment was heightened in anticipation of the Fed meeting and forthcoming policy decisions from various central banks, as evidenced by the strong demand observed in the auction of five-year government bonds. The Chinese yuan trading offshore in Hong Kong increased by 0.1% against the US dollar, reaching 7.0617 per dollar. This movement comes as markets interpreted the statement from the recent Politburo meeting, released on Monday, to suggest that policymakers are not in a hurry to implement further stimulus measures. The British pound experienced a slight decline, trading at $1.3303, whereas the New Zealand dollar saw a modest increase, reaching US$0.5781.