Dollar slips as traders eye next weeks Fed meeting
3 minute readPublished: Friday, December 5, 2025 at 11:30 pm
Dollar Slides as Traders Anticipate Fed Rate Cut
NEW YORK - The U.S. dollar experienced a slight decline today, though it remained within its recent trading range against other major currencies. This movement comes as market participants eagerly await the Federal Reserve's upcoming meeting next week, where a rate cut is widely anticipated.
The dollar index, which gauges the currency's performance against a basket of six major currencies, dipped by 0.1% to 98.994. This figure is close to the five-week low of 98.765 recorded on Thursday. The index is down 0.5% for the week.
The euro remained relatively stable, trading around $1.16433, near its three-week high of $1.1681. Traders are currently pricing in a high probability, nearly 90%, of a Fed rate cut next week, with the potential for two more reductions next year, according to LSEG data.
Recent data, including some soft labor market indicators, has reinforced the expectation of a rate cut. Analysts suggest the dollar appears overvalued relative to its peers, justifying the softer tone.
The release of U.S. consumer sentiment data, showing an improvement in early December, failed to bolster the dollar's performance. Additionally, the Personal Consumption Expenditures (PCE) Price Index showed a 0.3% increase in September, mirroring the August gain. Excluding food and energy, the PCE Price Index rose by 0.2% in both September and August.
Investors are also considering the possibility of Kevin Hassett, a White House economic advisor, potentially succeeding Jerome Powell as Fed chair. Hassett is expected to advocate for further rate cuts.
The yen saw a slight increase, rising 0.1% to 155.295 against the dollar, supported by expectations that the Bank of Japan (BOJ) might raise rates this month. The BOJ is reportedly prepared to raise rates on December 19, barring any significant economic disruptions.
Sterling remained relatively unchanged, trading around $1.3329, near its six-week peak of $1.3385.
Next week will see a series of central bank policy decisions, including those from the Reserve Bank of Australia, the Bank of Canada, and the Swiss National Bank, in addition to the Fed's announcement. The following week will bring decisions from the BOJ, the European Central Bank, the Bank of England, and Sweden's Riksbank.
Bitcoin, the leading cryptocurrency, experienced a decline for the second consecutive day, falling by 3% to $89,701.
BNN's Perspective: The market's anticipation of a Fed rate cut reflects a broader trend of central banks navigating economic uncertainties. While the potential for rate cuts may provide some short-term relief, it's crucial to monitor the long-term implications for inflation and economic growth. The appointment of a new Fed chair could further influence the direction of monetary policy.
Keywords: Dollar, Federal Reserve, Fed, Interest Rates, Rate Cut, Euro, Yen, Bitcoin, Central Bank, Monetary Policy, Economic Data, Consumer Sentiment, PCE Price Index, Kevin Hassett, Jerome Powell, Bank of Japan, BOJ, Sterling, Currency Markets.