The US Dollar is demonstrating ongoing weakness as it nears its third straight weekly drop on Friday. The anticipation of rate cuts by the US Federal Reserve in the upcoming year continues to apply downward pressure on the USD compared to its six main currency counterparts, as market participants get ready for the upcoming statements from the Federal Reserve on Friday, looking for more insights into the direction of US interest rates. President Beth Hammack of the Cleveland Fed and President Austan Goolsbee of the Chicago Fed are scheduled to give speeches.
On Thursday, data indicated that the number of Americans applying for new unemployment benefits increased to 236,000 for the week ending December 6, surpassing the market consensus of 220,000 and higher than the previous week’s count of 192,000 (revised from 191,000), marking the highest increase since the middle of July 2021. The US central bank decided to lower rates by 25 basis points in a split vote during its December policy meeting on Wednesday, setting a range of 3.50% to 3.75%. Two Federal Reserve officials chose to keep the interest rate steady, while Stephen Miran, who was appointed by Trump in September, pushed for a larger rate cut, and the Federal Reserve’s economic forecasts suggest that a rate cut is expected for next year, although upcoming data could change this perspective.
Current market expectations suggest a nearly 75% chance that the Fed will keep interest rates steady next month, up from the 70% probability noted before the rate cut announcement, according to the reports. The Australian dollar is currently situated within a narrow trading range above the mid-0.6600s, after reaching a new three-month high at 0.6686 on Wednesday, though the duo encounters obstacles in advancing after the release of the unsatisfactory Australian employment data for November. JPY regains some ground, moving above 155.75, as the current risk-on environment puts pressure on the currency, and next week, all eyes will be on the interest rate decision from the Bank of Japan, with a poll from December 2-9 revealing that 90% of economists expected the Japanese central bank to raise short-term interest rates from 0.50% to 0.75% in the upcoming December meeting, a significant increase from the previous month’s 53%.
The EUR holds steady at 1.1740 after reaching an eight-week high on Thursday, as the final reading of the German Harmonized Index of Consumer Prices met market expectations, rising 2.6% year-over-year in November, in line with the prior figure of 2.6%. The British pound has fallen to around 1.3375 following the underwhelming UK Gross Domestic Product report, as the UK GDP saw an unforeseen drop of 0.1% in October, reflecting the same 0.1% reduction recorded in September, according to the reports on Friday, while the current market outlook suggested a 0.1% increase over that period.