The dollar fell for a ninth consecutive session on Wednesday as traders strengthened their bets on a Federal Reserve rate cut, driven by softer US economic data and growing expectations of a more dovish stance from the central bank.

Fed Governor Christopher Waller said last week that the labor market had weakened enough to justify another quarter-point cut in December, while Kevin Hassett — a senior White House economic adviser — has emerged as the leading contender to become the next Fed Chair.

President Donald Trump said he will announce his choice for Fed Chair in early 2026.

Christina Hooper, chief market strategist at Man Group, noted: “Such an early announcement would effectively create a ‘shadow Fed Chair,’ given that Jerome Powell’s term doesn’t end until May.”

She added: “This could complicate the Fed’s communication on monetary policy and create confusion in markets at a time when clarity is most needed.”

According to CME’s FedWatch tool, markets have now priced in an 87% chance of a December rate cut, up sharply from just 30% on November 19.

With December largely priced in, investor focus is shifting toward the Fed’s path beyond the upcoming meeting, with markets expecting around 88 basis points of easing by December 2026.

The US Dollar Index slipped 0.15% to 99.10, moving toward an annual decline of nearly 9%.

Euro rises as attention turns to Ukraine peace talks

The euro edged up 0.11% to $1.1639, with investors monitoring progress in Ukraine peace negotiations — developments that could strengthen Europe’s energy security and lower costs, potentially supporting the single currency.

However, the Kremlin said Wednesday that Russia and the United States have not reached any settlement on a potential peace agreement, following a five-hour meeting between President Vladimir Putin and senior envoys of President Trump.

Analysts believe the euro could see further gains if a ceasefire or comprehensive peace deal emerges, particularly if elevated defense spending continues to support economic activity in the coming years.

Eurozone inflation data came in slightly above expectations on Tuesday, but market pricing for the ECB remained unchanged, with expectations that the central bank will hold rates steady until early 2027.

Yen hovers near intervention zone

The dollar slipped 0.13% to ¥155.69 on Wednesday after touching ¥155.89 the previous day, as Bank of Japan Governor Kazuo Ueda delivered his strongest indication yet that a rate hike may be considered later this month.

Lee Hardman, senior currency economist at MUFG, said: “The initial market reaction raises doubts about whether an early rate hike by the Bank of Japan will be enough on its own to reverse the yen’s persistent weakness since Sanae Takaichi became LDP leader in early October.”

Takaichi is expected to favor expansionary fiscal policy and lower borrowing costs.

Analysts also noted that Washington is likely to push back against the yen sliding to ¥160 or beyond, implying intervention becomes increasingly probable at that level. US Treasury Secretary Scott Bessent has repeatedly blamed Japan’s ultra-loose policies for keeping the yen undervalued.

Australian dollar climbs… and Bitcoin rebounds

In Asia, the Australian dollar rose to its highest level since October 30 at $0.6584 after GDP data came in slightly below forecasts. The Reserve Bank of Australia is widely expected to keep rates unchanged next week.

A major move came from India, where the rupee broke beyond 90 per US dollar amid pressure from weak trade flows and portfolio outflows, despite strong economic growth in the world’s fifth-largest economy.

A sharp rebound in Bitcoin helped revive risk appetite. The world’s largest cryptocurrency rose 2% on Wednesday to a two-week high of $93,633.70, after jumping 6% in the previous session.

Bitcoin had slumped earlier in December after a difficult November, during which it lost more than $18,000 — its biggest dollar decline since May 2021, when several major cryptocurrencies crashed.

Gold prices rose in European trading on Wednesday, resuming the gains that briefly paused yesterday and moving back toward a six-week high. The metal is drawing support from the continued weakness in the US dollar, which remains under pressure as markets price in a potential Federal Reserve rate cut this December.

To reassess those expectations, investors are awaiting a series of key US data releases throughout the day, including November’s private-sector employment report and the ISM services reading.

Price Overview

• Gold prices today: Spot gold rose 0.55% to $4,228.91, from an opening level at $4,206.23, after hitting an intraday low of $4,201.22.

• On Tuesday, gold fell 0.6% — its first decline in three sessions — due to profit-taking following Monday’s six-week high at $4,264.60 per ounce.

The US Dollar

The dollar index fell 0.2% on Wednesday, extending its losses for an eighth consecutive session and approaching multi-week lows, reflecting ongoing broad-based weakness in the US currency.

A weaker dollar typically boosts demand for dollar-priced bullion among holders of other currencies.

The latest decline follows soft US data and cautious remarks from several Federal Reserve officials, which lifted the odds of a rate cut at December’s meeting.

US Interest Rates

• Kevin Hassett — now emerging as the leading candidate to succeed Jerome Powell as Fed Chair — said interest rates “should be lower.”

• According to CME’s FedWatch tool: Markets are pricing an 87% probability of a 25-basis-point rate cut in December, while the probability of leaving rates unchanged stands at 13%.

• Investors are closely watching today’s ADP private-sector jobs report and the ISM services reading for further signals to refine these expectations.

Outlook for Gold

• Tim Waterer, chief market analyst at KCM Trade, said buyers remain interested in gold given the rate outlook, but may be waiting for clearer signs of economic slowdown — the kind of signal that could give the Fed justification for a rate cut this month.

• Waterer added that prices are relatively steady with few new catalysts, and that higher liquidity during European and US trading hours typically tempers early-session enthusiasm in Asia.

SPDR Holdings

Gold holdings at SPDR Gold Trust — the world’s largest gold-backed ETF — fell by 1.71 metric tons on Tuesday to 1,048.30 tons, slightly below the 1,050.01-ton level reached earlier, which marked the highest since October 22.

The euro rose in European trading on Wednesday against a basket of global currencies, extending its positive momentum for a third consecutive session versus the US dollar and moving close to breaking a two-week high, supported by persistent inflationary pressures facing European Central Bank policymakers.

Fresh official data showed an unexpected rise in headline consumer inflation in November, reducing the likelihood of an ECB rate cut in December.

Price Overview

• EUR/USD climbed 0.2% to 1.1644$ from an opening level of 1.1622$, after touching an intraday low of 1.1617$.

• The euro ended Tuesday up more than 0.1% versus the dollar, marking a second straight daily gain supported by European inflation data. The currency had reached a two-week high of 1.1653$ the day before.

Inflation in Europe

Official figures released yesterday showed an unexpected increase in euro-area inflation, highlighting persistent price pressures facing ECB policymakers.

Headline CPI rose 2.2% year-on-year in November, above market expectations of 2.1%, after a 2.1% increase in October.

Core CPI rose 2.4% in November, in line with expectations and unchanged from the previous month.

European Interest Rates

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

• Sources told Reuters the European Central Bank is leaning toward maintaining interest rates unchanged at its December meeting.

• Investors now await additional euro-area data ahead of the 17–18 December meeting to reassess rate-cut probabilities.

The Japanese yen rose in Asian trading on Wednesday against a basket of major and minor currencies, resuming the gains that briefly paused yesterday versus the US dollar and moving toward retesting a two-week high. The advance comes as markets price in the possibility of a Bank of Japan rate hike later this month.

More hawkish comments from BOJ Governor Kazuo Ueda have opened the door to near-term policy normalization, with investors awaiting further evidence on whether Japan will raise interest rates in December.

Price Overview

• USD/JPY dipped about 0.2% to 155.61¥ from an opening level of 155.86¥, after recording an intraday high of 155.90¥.

• The yen ended Tuesday down 0.3% versus the dollar, its first decline in four sessions, as traders took profits following Monday’s jump to a two-week high at 154.66¥.

Kazuo Ueda

BOJ Governor Kazuo Ueda offered a more optimistic outlook for Japan’s economy on Monday, saying the central bank will assess the pros and cons of a rate hike at its upcoming December policy meeting.

Analysis

Christopher Wong, FX strategist at OCBC, said the latest communication appears to be early signaling ahead of a potential rate increase, making a December or January hike “highly plausible.”

He added: “The question is whether this will be a one-and-done move followed by a long pause. A sustained yen recovery likely requires the BOJ to continue signaling a firmer tightening stance.”

Japanese Interest Rates

• Sources told Reuters the Bank of Japan is preparing markets for a potential December rate hike, reviving its earlier hawkish tone as concerns return over the yen’s sharp depreciation and as political pressure to keep rates low fades.

• Market pricing currently assigns roughly a 60% probability to a 25-basis-point rate hike in December.

• Investors are awaiting fresh data on inflation, unemployment, and wage trends in Japan to reassess these expectations.