The U.S. Dollar, after enjoying an eight-week upward trajectory, experienced a decline against major global currencies during the week ending on November 29. It weakened against the euro, British pound, Australian dollar, Japanese yen, Swiss franc, and Swedish krona. However, it rose slightly against the Canadian dollar, amid U.S. threats of increased trade tariffs with Canada. The Dollar Index saw significant losses, influenced by renewed expectations of a Federal Reserve rate cut, easing geopolitical tensions in the Middle East, and reevaluation of trade and fiscal policies under the incoming administration.
Specifically, the Dollar Index, which gauges the Dollar's performance against a basket of six currencies, fell by 1.7 percent over the week. It dropped from a closing level of 107.55 on November 22 to 105.74 by the week's end. The Index marked its weekly high of 107.50 on Tuesday and its low of 105.61 on Friday.
At the week’s commencement, the Dollar retreated from two-year highs following U.S. President-elect Donald Trump's nomination of hedge fund manager Scott Bessent as Treasury Secretary. This move seemed to indicate a softer shift from current policies, comforting the bond markets, reducing bond yields, and consequently, weakening the Dollar.
The Federal Open Market Committee (FOMC) minutes released on Tuesday revealed members’ concerns regarding the appropriate pace of policy easing. Participants agreed that monetary policy should carefully balance the risks of easing too quickly, potentially hampering inflation progress, against easing too slowly, which could overly weaken economic activity and employment. They judged it prudent to gradually lessen policy restraint due to uncertainties about the neutral interest rate level.
Nevertheless, renewed tariff threats prompted a Dollar resurgence to the week's high on Tuesday when President-elect Trump threatened additional tariffs on China, Mexico, and Canada.
On Wednesday morning, data from the U.S. Bureau of Economic Analysis reported that the Annual PCE Price Index rose as anticipated to 2.3 percent from 2.1 percent previously. Its core component similarly climbed to 2.8 percent from 2.7 percent. Month-on-month, the PCE Price Index remained steady at 0.2 percent, and its core measure held at 0.3 percent, both aligning with expectations.
The lack of negative surprises in the PCE inflation readings on Wednesday bolstered rate cut expectations, placing further downward pressure on the Dollar. According to the CME FedWatch tool, which tracks rate traders' expectations, the probability of a quarter-point rate cut in December climbed to 66 percent by Friday from 52 percent on Monday.
The Dollar's weakness, coupled with hawkish remarks from ECB officials, boosted the EUR/USD pair to a Friday high of 1.0597 from the week's low of 1.0424 on Tuesday. Despite a challenging economic outlook in the region, the pair gained 1.52 percent over the week, closing at 1.0575 on Friday compared to 1.0417 the previous week. Regional data indicated inflation rose in November, meeting expectations but exceeding the ECB's target.
The GBP/USD pair surged by 1.64 percent during the week-ending November 29, raising sterling to $1.2737 from $1.2531 a week prior. The pair climbed from a Tuesday low of 1.2503 to a Friday high of 1.2749, buoyed by renewed inflation concerns and less dovish signals from the Bank of England officials.
The Australian Dollar increased by 0.14 percent against the U.S. Dollar. The pair peaked at 0.6549 on Monday and dipped to a low of 0.6432 on Tuesday, closing eventually at 0.6510 as opposed to 0.6501 from the preceding week. The Australian Dollar's movement was partly influenced by the monthly CPI indicator holding steady at 2.1 percent in October.
The USD/JPY pair fell by 3.2 percent over the past week, driven by rising Tokyo CPI figures and Bank of Japan officials' remarks that fueled speculation of an upcoming rate hike in December. The pair dropped to 149.75 from 154.74, with a broader weekly trading range of a Monday high of 154.72 and Friday low of 149.46. Trade tensions with other nations supported the yen's ascent to a six-week high due to its safe-haven status.
Despite last week's considerable decline, the Dollar rebounded on Monday, lifting the Dollar Index by 0.59 percent to 106.36. Looking ahead, key U.S. economic data releases include the ISM Manufacturing PMI on Monday, JOLTs job data on Tuesday, ISM Services PMI and Federal Reserve Chair Jerome Powell's speech on Wednesday, and the monthly non-farm payrolls report on Friday.
Currently, the EUR/USD pair has decreased to 1.0504 amid concerns over France's political landscape. The GBP/USD pair fell to 1.2676, and the AUD/USD pair dipped to 0.6472. However, the USD/JPY pair rose to 150.31.
