The US dollar remained near a one-week low during Wednesday’s trading as markets awaited further economic data and continued to speculate about Federal Reserve policy.

Growing expectations of an interest-rate cut by the Federal Reserve in December helped support global equities.

The dollar index stayed close to its lowest level in a week, while China’s offshore yuan touched a 13-month high after the Chinese central bank guided the currency toward stronger levels alongside broad US-dollar weakness.

With markets becoming more certain about a Fed rate cut next month, traders believe the path for long-term forward premiums will depend more heavily on the Reserve Bank of India’s policy decision scheduled for December 5.

Data released Tuesday showed that US retail sales rose less than expected in September, while producer prices came in line with expectations.

US consumer confidence declined in November as households grew increasingly worried about jobs and their financial conditions.

This prompted traders to increase their bets on a Fed rate cut next month, with markets now pricing an 84% probability of a 25-basis-point reduction, according to the CME FedWatch tool — keeping pressure on the US dollar.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said: “The overnight data certainly paints a picture of a slowing US economy, adding to the justification for a near-term rate cut by the FOMC.”

Against a weaker dollar, the euro moved close to the 1.16 level and was last traded at 1.1567, supported by slight indications of progress on a peace plan between Russia and Ukraine.

Ukrainian President Volodymyr Zelensky said Tuesday that his country is ready to move forward with the US-supported framework to end the war with Russia and that he would discuss the remaining points of contention with US President Donald Trump, in talks that should include European allies.

The British pound was little changed, stabilizing at 1.3166 ahead of the highly sensitive budget announcement to be presented today by UK Finance Minister Rachel Reeves, who is expected to reveal tens of billions of pounds in tax increases.

Traders rushed into the options market for protection against potentially sharp swings in the pound ahead of the budget outcome.

Thierry Wizman, global FX and rates strategist at Macquarie, said in a note: “Speculative activity and hedging against sterling have risen in the weeks leading up to the UK’s Autumn Budget statement.” He added that the currency may see a temporary boost if the proposed budget is viewed as “fiscally disciplined.”

The US dollar fell 0.03% against a basket of major currencies to 99.82, after losing 0.3% in the previous session — its biggest daily decline in about three weeks.

The greenback also came under pressure following a Bloomberg report stating that White House economic adviser Kevin Hassett has emerged as a leading contender for the Federal Reserve chairmanship.

Like Trump, Hassett has argued that interest rates should be lower than they are under Jerome Powell’s leadership. US Treasury Secretary Scott Bessent said Tuesday that there is a good chance Trump will announce his choice before Christmas.

Rodrigo Catril, senior currency strategist at National Australia Bank, said: “Hassett is viewed as being closely aligned with President Trump’s preference for lower interest rates, and his appointment would likely strengthen the administration’s push for a more accommodative monetary policy.”

Meanwhile, a weaker dollar provided some relief to the yen, which slipped 0.1% on Wednesday to 156.24 per dollar, but remained far from last week’s ten-month low of 157.90.

Traders remain alert to the possibility of intervention from Tokyo to halt the currency’s decline, with Thursday’s US Thanksgiving holiday offering a potential window for authorities to act.

Kong of Commonwealth Bank of Australia said: “Thanksgiving will mean thinner liquidity, and that could be a convenient time for Japanese authorities to intervene, as the impact on markets would be larger.” She added: “I do think direct intervention is definitely a risk this week, based on the recent comments from Japanese officials.”

Gold prices jumped in European trading on Wednesday to their highest level in two weeks, heading toward a move above $4,200 an ounce, supported by renewed safe-haven demand and continued weakness in the US dollar.

Expectations for a third consecutive Federal Reserve rate cut in December have strengthened, particularly after a run of soft US economic data and a series of less-hawkish remarks from several Fed policymakers.

Price Overview

• Gold today: Prices rose 0.95% to $4,169.40, the highest since November 14, up from an opening level of $4,129.98, after touching an intraday low of $4,129.85.

• On Tuesday, gold settled about 0.15% lower amid profit-taking and corrective moves.

US Dollar

The US dollar index fell around 0.25% on Wednesday, extending losses for a third straight session and hitting a one-week low, reflecting sustained pressure on the currency against a basket of major and minor peers.

As is well known, a weaker US dollar makes dollar-priced bullion more attractive to buyers holding other currencies.

US Interest Rates

• Tuesday’s data showed US retail sales rising less than expected in September, while the Producer Price Index increased 2.7% in the 12 months through September, matching the August pace.

• Fed Governor Christopher Waller said Monday that the labor market is now weak enough to justify another quarter-point rate cut in December, though any decision after that will depend on upcoming data, much of which has been delayed by the government shutdown.

• US Treasury Secretary Scott Bessent said Tuesday that the Fed’s current interest-rate management framework is “struggling” and in need of simplification.

• According to CME’s FedWatch tool, markets are pricing an 85% chance of a 25-bp rate cut in December, with a 15% probability of no change.

• Investors are closely watching upcoming US data and Fed commentary to reassess those probabilities.

Gold Outlook

Tim Waterer, chief market analyst at KCM Trade, said expectations have now shifted clearly toward a December rate cut. He noted that this outlook has been reinforced by a series of dovish-leaning remarks from Fed officials and weaker economic data, providing support for gold from a yield perspective.

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, were unchanged on Tuesday, with total holdings steady at 1,040.86 metric tons.

The euro strengthened in European trading on Wednesday against a basket of global currencies, extending its gains for a third straight session versus the US dollar and touching a one-week high. The move was supported by the ongoing decline in the greenback and optimism around progress toward a potential peace agreement between Russia and Ukraine.

With uncertainty still surrounding the likelihood of a European Central Bank rate cut in December, investors are awaiting further economic data on inflation, unemployment, and growth across the eurozone to better assess the path of ECB policy easing ahead.

Price Overview

• EUR/USD rose 0.2% to 1.1592 — the highest in a week — from an opening level of 1.1570, after touching an intraday low of 1.1563.

• The euro ended Tuesday up roughly 0.45%, marking a second straight daily gain, supported by positive developments in the peace talks as well as weak US economic data.

US Dollar

The dollar index fell about 0.25% on Wednesday, marking a third consecutive decline and hitting a one-week low, reflecting continued downward momentum in the US currency against both major and minor counterparts.

The decline comes as markets price in a higher probability of a Federal Reserve rate cut in December, driven by a stream of softer US data and more dovish-leaning commentary from several Fed officials.

Ukraine Peace Framework

Diplomacy has intensified in recent weeks as efforts accelerate to end the more than three-year war in Ukraine. The initial US proposal — a 28-point framework — served as a baseline for talks among the US, Ukraine, and several European partners. Kyiv rejected the early draft as being overly favorable to Moscow, particularly on issues of sovereignty, borders, and regional security guarantees.

This pushback prompted a new round of negotiations in Geneva, focused on reshaping the plan into something more balanced. The talks resulted in a joint US-Ukraine statement announcing an “updated and refined framework” with adjustments to sensitive sections and a stronger emphasis on territorial integrity and security assurances.

President Volodymyr Zelensky described the new version as “more balanced” and containing “the right elements,” signaling a softer stance from Kyiv. The European Commission also welcomed the progress, calling the revised plan a realistic basis for advancing negotiations.

However, the framework still awaits an official response from Moscow, which says it has not yet received clear details. Major points of contention — such as the status of disputed territories, Ukraine’s NATO ambitions, and future security guarantees — remain unresolved.

Even so, analysts view the resumption of structured, multilateral dialogue as a meaningful shift away from the military stalemate toward a more mature diplomatic track.

Bullish Sentiment

• Chris Turner, head of FX strategy at ING, said that while markets have seen similar optimism before, signs of a peace framework are beginning to appear in currency trading. He added that falling energy prices could also support the euro.

• SEB Bank noted in September that the euro could rise as much as 7.5% against the dollar if a credible peace agreement is reached.

• SEB analysts said such a breakthrough would be a “game-changer for European growth and inflation dynamics,” boosting household purchasing power and revitalizing the industrial sector.

European Rates

• Market pricing for a 25-basis-point ECB rate cut in December remains steady around 25%.

• Investors are awaiting further eurozone data on inflation, unemployment, and wage trends to refine expectations for the December meeting.

The New Zealand dollar strengthened broadly on Wednesday against a basket of major and minor currencies, extending gains for a second consecutive session versus the US dollar and hitting a three-week high. The move comes as investors increased their exposure to the kiwi after the Reserve Bank of New Zealand adopted a more hawkish tone at its final meeting of the year.

In line with market expectations — and marking a third consecutive rate cut — the RBNZ lowered interest rates by 25 basis points to their lowest level in three years, while signaling that the current easing cycle is effectively coming to an end as signs of economic recovery begin to emerge.

Price Overview

• NZD/USD rose 1.4% to 0.5697, the highest since November 4, up from an opening level of 0.5618. The pair recorded an intraday low of 0.5616.

• The kiwi ended Tuesday up 0.2% versus the US dollar, its second gain in three sessions, supported by a softer greenback.

Reserve Bank of New Zealand

The RBNZ cut its official cash rate by 25 basis points to 2.25% on Wednesday — its lowest since May 2022 — marking the ninth cut since the easing cycle began a year ago and the third in a row. The bank has now lowered rates by a cumulative 325 basis points since August 2024, as inflation slowed back into the medium-term target range of 2%–3% amid weak economic activity and a softening labor market.

In its final policy statement of the year — and the last under Governor Christian Hawkesby before Swedish economist Anna Breman takes over in December — the bank said future moves would depend on how inflation and economic conditions evolve over the medium term.

It noted that inflation risks are now “balanced,” with economic activity expected to remain soft through mid-2025 before gradually improving as lower interest rates support household spending.

Minutes from the meeting showed that policymakers debated holding rates at 2.50% or cutting by 25 basis points, with five of the six members voting in favor of the cut.

At a press conference, Governor Hawkesby highlighted the policy shift, noting the outlook “tilts slightly to the downside” but is consistent with keeping the policy rate unchanged through 2026. The bank now expects the OCR to reach 2.20% in Q1 2026 and 2.65% by Q4 2027 — lower than August forecasts but still reflecting a more hawkish bias, with little room left for further easing.

New Zealand Rate Outlook

• Following the RBNZ decision, market pricing for another 25-basis-point cut in February 2026 dropped below 20%.

• Futures markets see the policy rate ending 2026 around 2.25%.

Analyst Commentary

• Nick Tuffley, chief economist at ASB Bank, said the door to further easing “is not as wide as many had expected,” adding that the RBNZ was generally more cautious than anticipated. He noted that another cut is unlikely unless economic data weakens significantly.

• Doug Steel, chief economist at BNZ, said the hurdle for additional action is now high, adding: “The data would need to surprise meaningfully on the downside to push the RBNZ toward more easing.”