The dollar slipped on Monday ahead of a packed week of central-bank meetings led by the US Federal Reserve, with a rate cut now fully priced in by markets, even as deep divisions inside the policy committee leave the final outcome uncertain.

Alongside Wednesday’s Fed decision, Australia, Brazil, Canada, and Switzerland will also set policy this week, though none are expected to make changes to their current rate settings.

Analysts expect the Fed to deliver what is being called an “aggressive cut,” in which the statement tone, the Summary of Economic Projections, and Chair Jerome Powell’s press conference collectively set tougher conditions for any further easing next year.

Such messaging could support the dollar if it forces investors to dial back expectations for two or three additional cuts in 2026 — though communication may prove complicated given the clear split among policymakers, with several members already signaling their voting intentions.

Significant risks from dissent within the committee

Bob Savage, head of macro strategy at BNY, wrote in a note to clients: “We expect to see dissent from both hawks and doves.”

The Federal Open Market Committee has not seen three or more dissents in a single meeting since 2019, and this has happened only nine times since 1990.

Despite the dollar’s decline over the past three weeks, bullish sentiment has rebounded. Positioning data shows speculative traders holding their largest net-long dollar positions since before former President Donald Trump’s tariff shock that sent the currency lower.

And while the labor market continues to cool, economic growth remains solid, with fiscal stimulus from the “one big beautiful bill” expected to build gradually in the coming months. Inflation also remains well above the Fed’s 2% target.

“These factors could dissuade the Fed from delivering further cuts if they translate into renewed labor-market strength,” said Lee Hardman, currency strategist at MUFG.

Euro supported by rising yields

The euro rose 0.1% to $1.1652, lifted by higher eurozone bond yields. Germany’s 30-year bund yield touched its highest level since 2011 in early trading.

Unlike the Fed, the European Central Bank is not expected to cut rates next year. Influential board member Isabel Schnabel said Monday that the bank’s next move could, in fact, be a hike.

The Australian dollar climbed to its strongest level since mid-September at $0.6649 before trimming gains to trade down 0.1% at $0.6635.

The Reserve Bank of Australia meets Tuesday following a string of strong prints on inflation, growth, and household spending. Interest-rate futures now suggest the next move could be a hike — possibly by May — making the post-meeting statement and press conference the main focus.

“We expect the bank to remain on hold for an extended period, keeping the cash rate at 3.60%,” ANZ analysts wrote last week after revising their forecasts.

Canada set to hold steady

The Bank of Canada is widely expected to leave rates unchanged on Wednesday, while markets fully price in a hike by December 2026. The Canadian dollar held at C$1.3819 per US dollar after touching a 10-week high Friday on the back of strong jobs data.

The yen steadied at ¥155.44 per dollar after sharp losses in November, the British pound held near $1.3325, and the Swiss franc edged higher to CHF 0.804 per dollar.

Gold prices rose in European trading on Monday, moving higher toward their six-week peak, supported by ongoing weakness in the US dollar against a basket of major currencies as markets price in a likely Federal Reserve rate cut this week.

Data released Friday showed a slight increase in the core Personal Consumption Expenditures index in the United States, the latest sign that inflation is stabilizing in the world’s largest economy.

The Federal Reserve begins its final policy meeting of the year on Tuesday, with decisions due Wednesday. Markets currently expect a 25-basis-point rate cut — the third consecutive reduction this year.

Price Overview

•Gold prices today: Gold rose 0.5% to $4,218.97 from an opening level of $4,197.59, after touching an intraday low of $4,191.60.

•At Friday’s close, gold lost 0.2%, marking its third decline in four sessions amid profit-taking from last week’s six-week high of $4,264.60 per ounce.

•Those moves left the metal with a weekly decline of about 0.5%, its second weekly loss in the past three weeks, weighed down by weaker safe-haven demand.

US Dollar

The US Dollar Index fell 0.2% on Monday, extending its decline for a second straight session as the currency continues to weaken against major and minor peers.

Sluggish US economic data persisted last week, including the slight uptick in core PCE inflation, reinforcing the narrative of stable inflation in the broader economy.

US Interest Rates

•Several Federal Reserve officials — including New York Fed President John Williams and Governor Christopher Waller — said that easing policy in December may be justified given the weakening labor market.

•Kevin Hassett, now the leading candidate to replace Jerome Powell as Fed Chair, reiterated that interest rates “should be lower.”

•According to CME’s FedWatch Tool, markets are pricing an 87% probability of a 25-basis-point rate cut this week, with only 13% expecting no change.

Federal Reserve Outlook

The Fed’s final meeting of the year begins Tuesday, with decisions and updated projections due Wednesday. Policymakers’ economic forecasts, alongside comments from Chair Jerome Powell, are expected to offer clear signals on the likelihood of continued rate cuts into 2026.

Gold Market Expectations

Tim Waterer, chief market analyst at KCM Trade, said the core PCE data “came and went without any meaningful impact,” keeping the Fed on track to cut rates this week. Expectations for looser policy, he noted, are pushing gold higher.

Waterer added that the anticipated rate cut keeps the US dollar capped, giving gold room to extend gains.

SPDR Gold Trust

Holdings in the SPDR Gold Trust — the largest gold-backed ETF — fell by 0.33 metric tons on Friday to 1,050.25 metric tons, slipping from 1,050.58 metric tons, the highest level since October 22.

The euro rose in European trading on Monday against a basket of global currencies, resuming the gains that had paused over the past two sessions against the US dollar, moving toward a seven-week high on the back of expectations that the interest-rate gap between Europe and the United States will narrow.

The Federal Reserve is preparing this week to announce a third US interest-rate cut this year, while the improvement in economic activity across Europe is paving the way for a more hawkish stance from the European Central Bank in its upcoming meetings.

Price Overview

• Euro exchange rate today: The euro rose against the dollar by 0.15% to $1.1656 from the opening price of $1.1641, recording a low of $1.1635.

• The euro ended Friday’s session slightly lower — less than 0.1% — against the dollar, marking a second consecutive daily loss amid ongoing correction and profit-taking, after having earlier traded at a seven-week high of $1.1682.

• Over the past week, the euro gained 0.4% against the dollar, its second straight weekly rise, supported by strong business-activity data in Europe alongside continued weak economic data in the United States.

The US Dollar

The dollar index fell on Monday by 0.1%, extending losses into a second session, reflecting continued weakness in the US currency against a basket of major and minor currencies.

The Federal Reserve

The Federal Reserve begins its final policy meeting of the year on Tuesday, with decisions due on Wednesday. Markets currently expect a 25-basis-point cut in the benchmark rate — which would mark a third consecutive US rate cut.

European Interest Rates

• Data released last week showed an unexpected rise in headline inflation in the eurozone during November, indicating persistent inflationary pressures facing the European Central Bank.

• Following the inflation data, money-market pricing for a 25-basis-point ECB rate cut in December dropped from 25% to 5%.

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

• To reassess these probabilities, investors await further economic data from the eurozone ahead of the December 17–18 meeting.

Interest-Rate Gap

The interest-rate gap between Europe and the United States currently stands at 185 basis points in favor of US rates, and is expected to narrow this week to 160 basis points following the anticipated Federal Reserve decision.

A narrowing of the rate gap to its lowest range since May 2022 casts positive momentum on the euro’s exchange rate against the US dollar.

The Japanese yen rose in Asian trading on Monday against a basket of major and minor currencies, resuming the gains that had paused on Friday against the US dollar and moving once again toward a three-week high, supported by strong wage data in Japan showing the biggest increase in three months during October.

Last week, more hawkish comments from Bank of Japan Governor Kazuo Ueda opened the door to near-term policy normalization, coinciding with reports from government sources who told Reuters that the central bank is likely to raise interest rates in December.

Price Overview

The US dollar fell against the yen by about 0.3% to ¥154.90, down from the opening level of ¥155.34, after touching a high of ¥155.38 earlier in the session.

The yen ended Friday’s session down 0.2% against the dollar, marking its first decline in three days due to profit-taking and corrective moves after touching a three-week high of ¥154.34 earlier in the day.

The Japanese currency gained 0.5% last week in its second consecutive weekly rise and its strongest weekly gain since late September, as expectations increased for a narrowing of the interest-rate gap between Japan and the United States.

Japanese Wages

Japan’s Ministry of Labor said Monday that total monthly cash earnings and a separate measure of full-time wages rose 2.6% year-on-year in October, the fastest pace since July and above market expectations of a 2.2% increase. Wage growth for September was also revised up to 2.1% from 1.9%.

Stronger wage growth in Japan may pave the way for further price increases and faster inflation in the coming period. Rising inflation pressures on policymakers at the Bank of Japan strengthen the case for a rate hike.

Japanese Interest Rates

Following the wage report, market pricing for a quarter-point rate increase by the Bank of Japan in the December meeting rose from 65% to 70%.

Investors are now awaiting additional data on inflation, unemployment, and wages in Japan, along with comments from BOJ board members, to reassess rate-hike expectations.

Governor Kazuo Ueda last week expressed a more upbeat view of Japan’s economic outlook, saying the central bank will review the pros and cons of a rate increase at its December policy meeting.

Three government officials told Reuters that the Bank of Japan is likely to raise rates in December.