The euro edged lower in European trading on Friday against a basket of global currencies, retreating from a two-month high versus the US dollar, amid corrective moves and profit-taking, alongside attempts by the US currency to recover from low levels.

The single European currency, the euro, is on track to record a third consecutive weekly gain, supported by strong demand as one of the most attractive investment opportunities in the foreign exchange market, particularly after the narrowing of the interest rate gap between Europe and the United States.

European Central Bank President Christine Lagarde praised the recent improvement in economic activity across the euro area, and hinted at the possibility of raising growth forecasts at the upcoming monetary policy meeting next week.

Price overview

• Euro exchange rate today: The euro slipped by about 0.1% against the dollar to $1.1731, from an opening level of $1.1738, while it recorded a session high at $1.1746.

• The euro ended Thursday’s trading up by around 0.4% against the dollar, marking a second consecutive daily gain, and posted a two-month high at $1.1763, following weak US labor market data.

US dollar

The US dollar index rose by around 0.1% on Friday, recovering from a two-month low of 98.13 points, reflecting a rebound in the US currency against a basket of major and minor currencies.

Beyond bargain buying at lower levels, the dollar’s recovery comes as investors await stronger and clearer evidence regarding the path of US interest rates in 2026.

According to the CME FedWatch tool, pricing for the probability of keeping US interest rates unchanged at the January 2026 meeting currently stands at 76%, while pricing for a 25 basis point rate cut is stable at 24%.

Weekly performance

Over the course of this week’s trading, which officially concludes at today’s settlement, the single European currency, the euro, is up by around 0.8% against the US dollar, on track for a third straight weekly gain.

Christine Lagarde

European Central Bank President Christine Lagarde said on Wednesday that the euro area economy is showing clear resilience in the face of trade tensions, and that growth momentum is now approaching its potential level, which could prompt the ECB to raise its growth forecasts at the upcoming monetary policy meeting next week.

Lagarde added, during an event organized by the Financial Times, that in the latest round of economic projections, estimates were revised higher, and she expects this could happen again in December. She also pointed to improving confidence indicators, particularly in the business and manufacturing sectors, as well as employment data reflecting continued economic resilience.

Lagarde reaffirmed that monetary policy is “in a good place,” which investors interpret as a signal that there is no need for any adjustment to interest rates.

European interest rates

• Money market pricing for the probability of a 25 basis point interest rate cut by the European Central Bank in December is currently stable below 10%.

• Sources told Reuters that the European Central Bank is likely to keep interest rates unchanged at its December meeting.

Interest rate gap

Following this week’s Federal Reserve decision, the interest rate gap between Europe and the United States narrowed to 160 basis points in favor of US rates, the smallest gap since May 2022, which supports further gains in the euro against the US dollar.

The Japanese yen declined in Asian trading on Friday against a basket of major and minor currencies, on track for its first loss in three days against the US dollar, amid improving risk appetite across global financial markets and softer demand for the Japanese currency as a safe haven.

The Bank of Japan is set to meet next week, and markets widely expect a 25 basis point interest rate hike. Investors are closely watching remarks from Governor Kazuo Ueda for clearer signals on the direction of monetary policy in 2026.

Price overview

• Japanese yen exchange rate today: The US dollar rose against the yen by about 0.15% to 155.77, from an opening level of 155.58, while the session’s low was recorded at 155.45.

• The yen ended Thursday’s trading up around 0.3% against the dollar, marking a second consecutive daily gain, supported by US dollar selling following a less hawkish Federal Reserve meeting.

Global markets

US equity markets on Wall Street recorded fresh record highs in a broadly positive environment, particularly after the Federal Reserve implemented its third consecutive cut in US interest rates.

The Fed also announced it will begin purchasing short-term government securities starting December 12, aiming to manage liquidity levels in the market, with an initial round of roughly $40 billion in Treasury bills.

This comes in addition to around $15 billion that the Federal Reserve will reinvest into Treasuries starting this month from maturing mortgage-backed securities.

US dollar

The US dollar index rose by about 0.1% on Friday, rebounding from a two-month low of 98.13 points, reflecting a recovery in the US currency against a basket of global currencies.

Beyond bargain buying at lower levels, the dollar’s rebound comes as investors await clearer and stronger signals regarding the path of US interest rates in 2026.

Bank of Japan

The Bank of Japan will hold its policy meeting next week amid strong expectations of a 25 basis point rate hike to a range of 0.75%, the highest level since 2008 at the onset of the global financial crisis.

Markets are closely monitoring Governor Kazuo Ueda’s comments on the outlook for monetary policy in 2026, at a time when expectations are rising that the Japanese government may resort to further expansionary fiscal measures, adding complexity to the policy landscape facing the Bank of Japan.

Japanese interest rates

• Following recent inflation and wage data in Japan, market pricing for a quarter-point interest rate hike by the Bank of Japan at its December meeting has stabilized above 80%.

• Bank of Japan Governor Kazuo Ueda presented a more optimistic outlook for the Japanese economy last week, stating that the central bank will assess the pros and cons of raising interest rates at its next policy meeting.

• Three government officials told Reuters that the Bank of Japan is likely to raise interest rates later this December.

As emphasized in the newly published National Security Strategy, President Donald Trump’s administration has placed renewed focus on maintaining influence and control in Latin America. Washington’s growing pressure on Venezuela is a clear expression of this new foreign-policy doctrine, with the recent seizure of an oil tanker off the Venezuelan coast marking the latest escalation. Against this backdrop, it is important to understand how the country’s oil sector has become part of a larger geopolitical contest.

Since the United States imposed sanctions on Venezuelan crude in 2015, the country’s oil production has deteriorated dramatically. Years of declining oil revenue caused a massive drop in investment in energy infrastructure, meaning that even a full lifting of sanctions would make it extremely difficult to revive output to anything resembling its “glory years.” Nonetheless, some relaxation of sanctions in recent years allowed Venezuela to lift production noticeably. However, the latest escalation from the White House — including strikes on suspected drug-smuggling boats and the seizure of a tanker — has injected new uncertainty into the outlook for Venezuelan output.

Venezuela holds the largest oil reserves in the world, yet today contributes just 1% of global supply. The country accounts for roughly 17% of global proven reserves, with more than 300 billion barrels. By comparison, the United States holds about 81 billion barrels. In the mid-1990s, Venezuela produced around 5% of the world’s oil.

But years of mismanagement, under-investment, and U.S. sanctions caused production to collapse. The extremely heavy nature of Venezuelan crude also makes extraction costly and technically complex. With U.S. sanctions still in place, most Venezuelan oil now flows to China through “shadow fleets,” allowing both countries to circumvent restrictions.

In recent months, the Trump administration has expanded its military presence near Venezuela. Trump ordered the destruction of several small boats in the region, accusing those onboard of trafficking drugs for major cartels. The administration said U.S. forces have killed at least 87 people in 22 acknowledged strikes in the Caribbean and eastern Pacific since early September. This marks the largest U.S. military presence in Latin America in decades, prompting speculation that ground operations could be the next step.

In December, Venezuelan President Nicolás Maduro claimed the real motivation behind U.S. military action was oil, a charge the U.S. State Department quickly denied. Colombian President Gustavo Petro agreed with Maduro’s assessment, saying the three-month military campaign against Caracas amounted to nothing more than “oil negotiations.” Petro added that Trump “is not thinking about Venezuelan democracy, and not even about drug trafficking.”

Trump has made his position on Maduro clear, pushing openly for regime change. In late November, reports indicated that Trump gave Maduro a deadline to step down. Maduro reportedly demanded “global amnesty” for himself and his allies. According to leaks to the Miami Herald, Trump told Maduro: “You can save yourself and your closest circle, but you must leave the country now.” The same reports said Trump offered safe passage for Maduro, his wife, and his son, “only if he agreed to resign immediately.”

Even with Trump’s clear desire to remove Maduro, the question of whether he is seeking direct control of Venezuelan oil remains uncertain. Given the challenges of extracting Venezuela’s ultra-heavy crude and the severe deterioration of the country’s energy infrastructure, reviving output would be far from easy. Francisco J. Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute, estimates Venezuelan output at just under one million barrels per day today and suggests it could rise to 4–5 million barrels per day only if $100 billion were invested over ten years.

Legal scholar and Venezuelan oil-industry expert José Ignacio Hernández noted that “Venezuela’s oil sector is destroyed… It is not an attractive short-term market, especially for a country like the United States, which already has the world’s largest oil production.” He added that Maduro has already offered U.S. firms access to oil and gold projects in Venezuela. “If Trump wanted an exclusive deal to control Venezuelan oil, he would have accepted Maduro’s offer,” Hernández said.

Oil operations in Venezuela are believed to be divided roughly as follows: PDVSA holds about 50%; Chevron around 25%; Chinese-led joint ventures 10%; Russian companies 10%; and European firms 5%. Since Trump loosened restrictions on Chevron’s operations in Venezuela, the U.S. firm has been importing roughly 150,000–160,000 barrels per day into the United States.

Experts also note that even if the regime were replaced, Venezuela is unlikely to hand over its oil assets outright to the United States. Any new government would avoid appearing to surrender the country’s key resources, which could provoke domestic blowback. However, it may allow greater participation from global oil companies in exchange for the massive investments required to rehabilitate the country’s collapsed energy infrastructure.

With the opposition leader emerging from hiding to accept the Nobel Peace Prize, and with the United States seizing an oil tanker off the Venezuelan coast, Washington’s push to unseat Maduro appears far from over.

US stock indices fell on Thursday as markets digested the Federal Reserve’s statement, alongside pressure on the technology sector following disappointing earnings from Oracle.

In a move widely anticipated as a “hawkish cut,” the Federal Reserve on Wednesday lowered the federal funds rate by a quarter percentage point, bringing it into a range between 3.5% and 3.75%.

However, the move was accompanied by cautionary signals regarding the future path of monetary policy, with three dissenting votes within the Federal Open Market Committee — something not seen since September 2019.

The committee also raised its projection for economic growth (GDP) in 2026 by half a percentage point to 2.3% compared with the September forecast. It also continues to expect inflation to remain above its 2% target through 2028.

In a press conference following the decision, Federal Reserve Chair Jerome Powell said inflation remains “somewhat elevated” due to tariff effects, expressing hope that upcoming economic data will offer a clearer picture.

He noted that the Fed has cut rates by 175 basis points since September of last year, and that policy is now close to neutral territory.

As for trading, the Dow Jones Industrial Average rose by 1% (equivalent to 484 points) to 48,541 points as of 16:06 GMT, while the broader S&P 500 dipped 0.3% (equivalent to 22 points) to 6,864 points, and the Nasdaq Composite fell 1.1% (equivalent to 240 points) to 23,411 points.