The U.S. dollar saw a slight uptick early Tuesday, though overall sentiment toward the greenback remained weak as traders increasingly expect the Federal Reserve to deliver an interest rate cut at its meeting later this month.
By 04:30 ET (09:30 GMT), the Dollar Index — which measures the currency against six major peers — was up 0.1% at 99.422, recovering mildly after sliding for seven straight sessions to touch a two-week low on Monday.
Fed cut expectations weigh on the greenback
Fresh data on Monday showed U.S. manufacturing activity contracted for a ninth consecutive month in November, adding to signs that economic momentum is cooling heading into year-end.
According to the CME FedWatch tool, futures markets now imply an 88% chance of a 25-basis-point rate cut at the Fed’s December 10 meeting — a sharp rise from 63% a month ago.
Analysts at ING wrote that “we expect that the remainder of the week will validate the market’s dovish pricing for next week’s Fed meeting.”
Markets are also watching for confirmation of who will replace Fed Chair Jerome Powell, after reports that White House adviser Kevin Hassett has become the leading contender.
U.S. Treasury Secretary Scott Bessent said he sees a strong likelihood that President Donald Trump will reveal his choice before Christmas.
Euro holds steady ahead of inflation data
In Europe, EUR/USD dipped slightly to 1.1607, with diplomatic efforts over the Ukraine conflict continuing as U.S. envoy Steve Witkoff travels to Moscow for discussions with Russian officials.
Later in the session, the eurozone will publish flash inflation data. Economists expect annual price growth to land just above the ECB’s medium-term target — a reading unlikely to influence policy expectations, as markets anticipate no rate changes through 2026.
ING noted that “the risks are slightly on the downside for the euro, but our expectation is for a neutral FX impact nonetheless and EUR/USD can eye 1.170 again soon if USD drops in line with our call.”
The GBP/USD pair edged down to 1.3213, though the pound remained close to its highest levels in a month.
The move came after the head of the U.K.’s fiscal watchdog resigned Monday when the agency accidentally released confidential budget details before Chancellor Rachel Reeves presented them in Parliament.
Yen retreats after Monday bounce
In Asia, USD/JPY rose 0.3% to 155.94, rebounding after falling 0.5% the previous day amid hawkish commentary from Bank of Japan Governor Kazuo Ueda.
Ueda, speaking over the weekend, suggested the BOJ could consider a rate increase as early as this month, a signal that pushed Japanese government bond yields to new multi-decade highs.
The 30-year JGB yield climbed above 1.9%, while the 10-year approached 1.88%.
Elsewhere in the region, USD/CNY slipped slightly to 7.0700, and AUD/USD rose 0.1% to 0.6553.