The U.S. dollar was on track for its worst weekly performance since late July on Friday, as traders increased their expectations that the Federal Reserve will cut interest rates again next month.
A cooling-related outage at CME Group’s CyrusOne data centers halted trading overnight on its major currency platform, as well as on stock and commodity futures. According to LSEG data, trading resumed by 13:35 GMT after being offline for more than 11 hours.
The dollar has declined sharply this week. Traders believe weakening labor data will push the Fed toward more rate cuts, even though many policymakers continue to warn about stubborn inflation.
“With the post-shutdown run of releases, the data has generally been soft… overall it definitely leans toward a cut,” said Eric Theoret, FX strategist at Scotiabank in Toronto.
Fed funds futures now show an 87% chance of a rate cut at the Fed’s December 9–10 meeting, up from 71% a week earlier.
Currency markets steady despite CME outage
Fed officials enter their blackout period on Saturday, ending weeks of public commentary ahead of the December meeting.
The U.S. dollar index, which tracks the currency against six major peers, rose 0.06% to 99.59, regaining some ground. Still, it remains set for a 0.61% weekly decline — its worst since July 21.
Currency markets have largely shrugged off the CME outage. Trading volumes were already thin after Thursday’s U.S. Thanksgiving holiday.
“Liquidity remains thin… most major pairs are seeing choppy but range-bound action,” said Karl Schamotta, chief market strategist at Corpay in Toronto. He added that any turbulence later in the morning would be unlikely.
The euro slipped 0.09% to $1.1585. The Japanese yen strengthened 0.03% to 156.25 per dollar.
Focus shifts to the Bank of Japan
Bank of Japan Governor Kazuo Ueda is scheduled to speak on Monday. Traders will watch closely for any hint of a possible rate hike at the December BOJ meeting.
“There’s a lot of anticipation around the December BOJ meeting,” said James Lord, head of FX and emerging market strategy at Morgan Stanley. “Ueda has been cautious so far, but with dollar-yen at these levels and the government’s new fiscal package, a December hike is possible.”
Japanese Prime Minister Sanae Takaichi’s government has approved a $117 billion supplementary budget to fund a large stimulus package, most of it financed through new debt.
Sterling slipped 0.21% to $1.3211 but remains on pace for its best week since early August, up 0.85%. The move follows British finance minister Rachel Reeves’ new budget announcement.
Reeves defended the government’s plan, which includes increased welfare spending funded by raising taxes to their highest share of GDP since World War II.
The Canadian dollar strengthened after data showed Canada’s economy grew faster than expected in the third quarter, driven by crude oil exports and government spending. The loonie last traded up 0.48% at C$1.396 per U.S. dollar.
In cryptocurrency markets, bitcoin rose 1.40% to $92,680.
