The U.S. dollar strengthened on Tuesday ahead of the Federal Reserve’s expected rate cut on Wednesday. The Australian dollar also traded higher after its central bank signaled that further easing is unlikely.
Markets are preparing for the Fed’s decision as well as several other central bank announcements later this week.
The dollar extended its gains after new data showed a modest rise in U.S. job openings for October, while hiring stayed weak. According to the JOLTS report, job openings increased by 12,000 to 7.670 million. Economists surveyed by Reuters had expected 7.150 million vacancies.
Following the report, the dollar rose further, climbing to 156.735 yen and pushing the euro down 0.1% to $1.1619.
With the labor data released, investor attention shifted back to the Federal Reserve.
Expectations for deeper rate cuts in 2026 have eased as doubts grow about whether Kevin Hassett—considered the leading candidate to replace Jerome Powell when his term ends in May—will be as dovish as President Donald Trump hopes.
Karl Schamotta, chief market strategist at Corpay, said investors now expect a “hawkish cut,” meaning a rate reduction paired with cautious guidance. He added that such an outcome would likely keep short-term yields supported and limit any weakening of the dollar.
The U.S. dollar index rose 0.2% to 99.22.
US outlook for 2026
With a rate cut this week seen as almost certain, investors are shifting their focus to the Fed’s outlook for next year.
Commerzbank FX analyst Michael Pfister said markets will closely examine the new dot plot once the Fed statement is released. He noted that policymakers appear increasingly divided, and lower dots compared to the previous update would likely weigh on the dollar.
The September dot plot, released when the Fed resumed easing with a 25-basis-point cut, projected rates at 3.6% for the end of 2025, 3.4% for the end of 2026, and 3.1% by 2027.
The euro slipped after Monday’s drop in German bunds, following comments from ECB board member Isabel Schnabel. She suggested the ECB’s next move could be a rate hike rather than a cut, although not in the near term.
Aussie dollar gains; earthquake strengthens yen
The Australian dollar moved higher after the Reserve Bank of Australia kept rates steady for a third straight month at 3.6%. The currency rose 0.4% to US$0.6647 as the RBA warned that inflation pressures could persist. Gains continued after Governor Michele Bullock said additional rate cuts were not necessary.
In early Asian trading, the yen firmed after a powerful 7.5-magnitude earthquake struck northeastern Japan. The event added to risk-averse sentiment ahead of the Fed decision and several other central bank meetings. Demand was also strong at a five-year government bond auction.
Offshore, the Chinese yuan traded flat at 7.0622 per dollar, as markets interpreted Monday’s Politburo statement as showing little urgency for new stimulus.
The British pound eased to $1.3312, while the New Zealand dollar rose 0.3% to US$0.5794.
In cryptocurrency markets, bitcoin slipped 0.1% to $91,601.48, while ether gained 0.5% to $3,168.21.
