Dollar Dips Ahead of Fed Meeting as Traders Await Rate Decision
The U.S. dollar slipped on Tuesday as traders awaited the start of the highly anticipated Federal Reserve policy meeting. Markets also kept a close watch on ongoing trade negotiations in Asia that could shape global sentiment.
At 05:20 ET (09:20 GMT), the U.S. Dollar Index, which measures the greenback against six major currencies, was down 0.1% at 98.517, after falling 0.2% in the previous session.
Dollar Softens as Investors Await Fed Rate Cut
Traders remained cautious about pushing the U.S. currency higher ahead of the Fed’s two-day policy meeting, which begins later today.
The Federal Reserve is widely expected to cut interest rates by 25 basis points on Wednesday, with markets assigning a 96% probability to that outcome, according to the CME FedWatch Tool.
Investors are also hoping Fed Chair Jerome Powell will signal another rate cut at the December meeting, amid concerns over a weakening U.S. labor market.
“We’ve been bereft of data and are having to rely on anecdotes,” said analysts at ING. “Reports suggest Amazon may announce 30,000 job cuts, adding to growing fears over job security.”
Trade Talks Dominate Headlines
Elsewhere, U.S. President Donald Trump is set to meet Chinese President Xi Jinping in South Korea on Thursday to finalize the framework of a trade deal discussed over the weekend.
Earlier Tuesday, Trump and Japanese Prime Minister Sanae Takaichi signed two key agreements — one marking a “golden age” in U.S.-Japan relations, and another promoting rare earths cooperation.
“Optimism remains intact that Trump and Xi will agree on a meaningful trade truce this Thursday,” ING analysts noted, highlighting China’s earlier threats of rare earth export restrictions.
Euro Gains as German Sentiment Weakens
In Europe, the euro (EUR/USD) rose 0.1% to 1.1655, supported mainly by the weaker dollar.
Germany’s GfK consumer sentiment index fell to -24.1 for November, down from -22.5 in October, signaling further pressure on spending.
However, the Ifo business climate index improved slightly to 88.4 in October, offering a modest sign of stabilization.
The European Central Bank (ECB) meets Thursday and is expected to keep interest rates unchanged.
Meanwhile, GBP/USD fell 0.2% to 1.3304 after U.K. retail prices came in weaker than expected.
Annual inflation slowed to 1.0%, down from 1.4% previously.
“Food inflation dropped to 3.7% from 4.2%,” ING analysts said. “This could push the Bank of England closer to a rate cut in December.”
Yen Strengthens on U.S.–Japan Cooperation
In Asia, the yen strengthened sharply after the Takaichi–Trump meeting, which reaffirmed close defense and trade cooperation between Tokyo and Washington.
The USD/JPY pair fell 0.5% to 152.06, leading regional currency gains.
The Bank of Japan meets later this week and is widely expected to hold interest rates steady, despite calls from Prime Minister Sanae Takaichi to delay further hikes.
The Chinese yuan (USD/CNY) eased 0.1% to 7.1007, nearing its lowest level since November 2024.
The currency has been supported by strong midpoint fixes from the People’s Bank of China and optimism about a potential U.S.–China trade breakthrough when Trump and Xi meet later this week.
The Australian dollar (AUD/USD) slipped 0.1% to 0.6551 amid cautious risk sentiment.
