The U.S. dollar eased slightly on Monday as investors evaluated the outlook for U.S. interest rates ahead of this month’s Federal Reserve meeting. Market sentiment shifted after a series of weaker economic indicators suggested that growth is slowing and inflation remains subdued, though still persistent.
These factors strengthened expectations for a rate cut. Money-market pricing now reflects an estimated 88% probability of a quarter-point reduction at the Fed’s December 9–10 meeting, up from roughly 40% just a week earlier.
At the same time, traders are watching President Donald Trump closely after he confirmed that he has chosen his nominee for the next Federal Reserve chair, though he declined to reveal the name. Reports indicate the shortlist includes White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller. Hassett is believed to be the leading candidate but has downplayed speculation, saying only that he would be “happy to serve.”
A change in leadership could have a notable impact on the Fed’s future policy path. Trump has repeatedly pushed for faster and deeper rate cuts, raising expectations that his pick for Fed chair would support a more dovish monetary stance. Such a shift could benefit U.S. equities, particularly sectors that are highly sensitive to lower interest rates.
Later today, Fed Chair Jerome Powell is scheduled to speak. However, due to the Fed’s pre-meeting blackout period, he is not expected to provide new guidance on upcoming rate decisions.
In this environment, the U.S. dollar index slipped 0.2% to 99.25 by 07:01 ET (12:01 GMT), reflecting modest weakness against major currencies.
Yen strengthens on BOJ rate hike expectations
The Japanese yen gained against the dollar after Bank of Japan Governor Kazuo Ueda signaled that policymakers will assess the “pros and cons” of raising interest rates at the upcoming December 18–19 meeting. Analysts at ING noted that Ueda’s comments suggested minimal resistance from new Prime Minister Sanae Takaichi, who is generally viewed as favoring easier monetary policy.
Markets interpreted Ueda’s tone as hawkish, increasing expectations that the BOJ may deliver its first rate hike since ending negative interest rates earlier this year. The yen also benefited from rising Japanese government bond yields, as traders priced in a higher likelihood of further tightening.
Elsewhere in currency markets, the euro rose 0.3% to $1.1630, while the British pound remained mostly unchanged.
