The U.S. dollar paused on Thursday, consolidating after a strong surge in the previous session. The rally was fuelled by hawkish signals in the Federal Reserve’s latest meeting minutes, which dampened expectations for a possible rate cut at December’s policy meeting.
At 04:45 ET (09:45 GMT), the Dollar Index — a gauge of the greenback against six major currencies — was virtually flat at 100.150, following a 0.7% jump overnight.
Fed minutes underpin the dollar
The minutes from the Fed’s October meeting revealed a divided committee. “Many” policymakers opposed the idea of easing policy next month, while “several” still viewed a December rate cut as a distinct possibility.
The mixed views reinforced uncertainty around the economic outlook and prompted traders to temper expectations of imminent monetary easing.
Analysts at ING noted: “At the October meeting, several FOMC members were against the decision to cut rates, and many expected a hold in December. This confirms that Powell’s hawkish presser was representative of a good chunk of the Committee.”
Another factor weighing on the December outlook is the disrupted flow of economic data following the lengthy U.S. government shutdown.
The September jobs report is due later today, with payroll growth expected around 50,000. However, the data is now several months old, and its usefulness for policymakers is limited. The next meaningful figures — November jobs and an October payroll estimate — will not be released until December 16, six days after the Fed’s December 10 meeting.
As ING added: “Our call so far has been that jobs data would justify a December cut, but the change in the data release schedule makes it a much harder call now.”
ING says euro weakness unlikely to last
EUR/USD dipped 0.1% to 1.1525 after German producer prices fell slightly less than forecast.
ING suggested that deeper losses may be difficult to sustain: “We think EUR/USD can make brief explorations below 1.150, but for those to be sustainable, we’d need either a broader hawkish re-rating (due to strong US data) or some negative news affecting the euro.”
GBP/USD ticked up 0.1% to 1.3074, though the pound remains under a mild risk premium ahead of the U.K. Budget on November 26.
The government’s reversal on planned income tax increases has injected uncertainty into markets and pressured U.K. bonds, indirectly weighing on sterling.
Yen slides to its weakest level since January
In Asia, USD/JPY moved higher to 157.19 — its highest point in ten months — after gaining more than 1% overnight.
Bank of Japan Governor Kazuo Ueda met with Finance Minister Satsuki Katayama and Economic Minister Minoru Kiuchi on Wednesday.
Following the meeting, Katayama said “specific discussions around the exchange rate did not take place,” signalling a cautious stance on any direct currency intervention.
USD/CNY edged 0.1% higher to 7.1159 after the People’s Bank of China left its loan prime rate unchanged, as expected.
AUD/USD hovered near flat at 0.6478 after dropping 0.5% in the prior session.