The euro jumped in European trading on Monday to its highest level in two weeks against the US dollar, supported by continued weakness in the US currency as markets price in a Federal Reserve rate cut this December.

Amid ongoing uncertainty over the likelihood of a European rate cut next month, investors are awaiting Tuesday’s release of key eurozone inflation data for November, seeking stronger signals on the European Central Bank’s potential path toward policy easing.

Price overview

• EUR/USD today: The euro rose about 0.2% to $1.1616, the highest since 17 November, up from an opening price of $1.1596. The session low was $1.1589.

• The euro ended Friday’s session flat against the dollar for a second consecutive day.

• Over November, the euro gained 0.5% against the dollar, marking its third monthly rise in the past four months, supported by the ECB’s hawkish stance.

US dollar

The US Dollar Index fell around 0.2% on Monday, deepening losses for a sixth straight session and hitting a two-week low, reflecting persistent declines in the US currency against a basket of global peers.

A run of weak economic data and cautious commentary from Federal Reserve officials has driven expectations higher for a US rate cut in December, with markets waiting for additional American labor-market data due this week.

According to the CME FedWatch tool, the market is currently pricing an 87% chance of a 25-basis-point Fed rate cut in December, versus a 13% chance of no change.

European rates

• Money markets are pricing around a 25% probability of a 25-basis-point European Central Bank rate cut in December.

• Investors will look to tomorrow’s key eurozone inflation reading for clearer evidence on the ECB’s policy outlook and the likely direction of monetary easing in the euro area.

The Japanese yen rose in Asian trading on Monday against a basket of major and minor currencies, extending its gains for a third consecutive session against the US dollar and marking its highest level in two weeks. The currency continued to benefit from persistent weakness in the US dollar amid rising expectations of a Federal Reserve rate cut.

The advance was also supported by comments from Bank of Japan Governor Kazuo Ueda, who kept the door open for near-term policy normalization, boosting the likelihood of a rate hike in Japan this December.

Price overview

• USD/JPY today: The dollar fell 0.4% against the yen to ¥155.41, its lowest level since 19 November, down from an opening rate of ¥156.05. The session high was ¥156.15.

• The yen ended Friday’s session up 0.1% against the dollar, posting its second straight daily gain as safe-haven demand increased.

• Over the month of November, the yen lost 1.4% against the dollar, its third consecutive monthly decline, driven by concerns over Prime Minister Sanae Takaichi’s stimulus plans.

US dollar

The US Dollar Index fell around 0.2% on Monday, deepening losses for a sixth straight session and hitting a two-week low, reflecting continued weakness in the US currency against a basket of global peers.

A series of weak US economic data and cautious commentary from Federal Reserve officials have pushed expectations higher for a rate cut in December, with markets awaiting key labor-market releases throughout this week.

Kazuo Ueda

Bank of Japan Governor Kazuo Ueda on Monday delivered a more optimistic outlook for the Japanese economy, stating that the central bank will weigh the pros and cons of raising interest rates at its upcoming December policy meeting.

Analysis and commentary

Christopher Wong, currency strategist at OCBC, said the latest signaling “appears to be a pre-emptive setup for a potential rate hike, making a December or January move highly plausible.”

Wong added: “The key question is whether this will be a one-and-done hike followed by another long wait. A meaningful yen recovery would likely require the BOJ to maintain a stronger tightening stance.”

Japanese interest rates

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

• Following Ueda’s comments, market pricing for a quarter-point BOJ rate hike in December rose from 40% to 60%.

• To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wage growth in Japan.

US stock indexes rose on Friday after a technical issue affecting futures trading was resolved, allowing bets on a Federal Reserve rate cut to continue and supporting demand for high-risk assets.

Following the Thanksgiving holiday on Thursday, Wall Street is set to close early today, with normal trading hours resuming next week.

US authorities halted stock futures trading for several hours earlier in the day due to a cooling-system malfunction at a CyrusOne data center used by CME Group. The exchange operator confirmed that the issue was fixed and trading had resumed.

Speculation around the Federal Reserve’s policy stance in next month’s meeting continues to build. According to CME FedWatch, the probability of a rate cut in December has risen to 83%, up from 50% a week ago.

Federal Reserve Governor Christopher Waller said this week that a rate cut in December is necessary, though he noted that the January decision may be more challenging due to a backlog of delayed economic data.

At the close of the session, the Dow Jones Industrial Average rose 0.6% (289 points) to 47,716, posting a weekly gain of 3.2% and a monthly gain of 0.3%, with an intraday high of 47,750 and a low of 47,475.

The broader S&P 500 climbed 0.5% (36 points) to 6,849, recording a weekly gain of 3.7% and a monthly gain of 0.1%, reaching a high of 6,850 and a low of 6,819.

The Nasdaq Composite rose 0.6% (151 points) to 23,365, jumping 4.9% for the week but logging a monthly loss of 1.5%, with an intraday high of 23,365 and a low of 23,250.

Most cryptocurrencies rose on Friday as demand returned for high-risk assets, supported by growing bets that the Federal Reserve will cut interest rates.

Speculation around the Fed’s policy stance in next month’s meeting continues to build. According to CME’s FedWatch tool, the probability of a rate cut in December has climbed to 83%, up from 50% a week ago.

Federal Reserve Governor Christopher Waller said this week that a rate cut in December is necessary, though he noted that the January decision could be more complicated due to a backlog of delayed economic data.

Ethereum

In trading, Ethereum rose 0.3% on CoinMarketCap to $3,040.09 as of 19:19 GMT, bringing its weekly gains to 10%.