The U.S. dollar moved slightly lower on Monday, giving back part of last week’s advance. Traders increased their expectations for a Federal Reserve rate cut after comments from influential Fed official John Williams suggested that policy easing could come as soon as next month.
At 04:00 ET (09:00 GMT), the Dollar Index—tracking the greenback against six major currencies—was down 0.1% at 100.077. This follows a gain of nearly 1% last week.
Dollar Declines as Fed Cut Bets Increase
Market confidence in a December rate cut strengthened after John Williams of the New York Fed signaled on Friday that a policy adjustment may be possible soon. As a result, the probability of a 25-basis-point cut in December rose to around 69%, up from roughly 44% one week earlier, according to the CME FedWatch Tool.
However, the latest Fed meeting minutes showed that several policymakers still believe inflation remains too high. This keeps the December outcome uncertain.
This week’s focus, during a shortened holiday period, will be on U.S. economic data. September retail sales arrive on Tuesday, followed by the Federal Reserve’s Beige Book on Wednesday. Analysts at ING noted that any evidence of broader weakness in employment could strengthen the case for a December rate cut.
Euro Supported by Ukraine Peace Discussions
In Europe, EUR/USD rose 0.2% to 1.1531, supported by signs of progress in peace talks between Ukraine and Russia. The United States and Ukraine planned further discussions on Monday after agreeing to revise an earlier peace proposal seen as too favorable to Moscow.
A joint statement said that negotiators produced a “refined peace framework” during talks in Geneva on Sunday, though no detailed information was released.
Meanwhile, the German Ifo business climate index fell to 88.1 in November, down from 88.4 in October, signaling ongoing weakness in Europe’s largest economy.
ING analysts noted that EUR/USD’s limited movement near 1.1500 may reflect investors preferring to express euro-positive sentiment through EUR/CHF rather than EUR/USD. Still, they expect this week’s events to help support the 1.1500 level.
Pound Softens Ahead of U.K. Budget
GBP/USD slipped to 1.3096 as the pound stayed under pressure ahead of Wednesday’s budget announcement. Finance minister Rachel Reeves is expected to balance growth-supporting measures with reassurances that the U.K. can meet its fiscal targets.
ING analysts added that sterling’s upside appears limited if the budget is tight and credible, while there remains downside risk if markets believe the Bank of England’s expected 2026 easing cycle is under-priced.
Yen Under Watch for Possible Intervention
In Asia, USD/JPY rose 0.2% to 156.71, with the yen still under pressure after hitting multi-month lows last week. The pair gained more than 1% amid expectations that the Bank of Japan could maintain or even ease its policy stance, while the new administration under Sanae Takaichi pursues expansionary fiscal and monetary measures.
Officials in Tokyo escalated warnings that currency intervention remains an option if yen weakness becomes disorderly. Limited trading activity due to a Japanese holiday has also kept movements contained.
The reduced liquidity this week may offer a potential window for intervention, as past actions often occurred during quieter market periods.
Elsewhere, USD/CNY was steady at 7.1064, while AUD/USD edged 0.1% higher to 0.6465, supported by improving global risk appetite.
