- The U.S. Dollar Index softened to around 98.15 during Friday’s Asian session, pressured by concerns over the Federal Reserve’s independence and growing bets on U.S. interest rate cuts.
- Traders are now awaiting next week’s U.S. December employment report for fresh direction.
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, traded on a softer note near 98.15 during Asian hours as investors positioned ahead of key U.S. economic data later this month to assess the outlook for interest rates.
The dollar has also come under pressure from concerns over the Federal Reserve’s independence under U.S. President Donald Trump. Market participants expect Trump to appoint a more dovish successor to Fed Chair Jerome Powell, whose term ends in May, after repeatedly criticizing Powell last year for not cutting interest rates more aggressively.
“We expect concerns around central bank independence to extend into 2026 and see the upcoming change in Fed leadership as one of several factors skewing risks to our Fed funds rate forecast to the dovish side,” Goldman Sachs strategists said.
Financial markets are currently pricing in two U.S. rate cuts this year, compared with just one projected by a divided Federal Reserve. According to the CME FedWatch Tool, markets see nearly a 15% probability of a rate cut at the Fed’s next meeting in January.
Attention now turns to key U.S. economic data due next week, including the Nonfarm Payrolls (NFP) and unemployment rate. These reports should provide fresh insight into labour market conditions and the outlook for U.S. interest rates in 2026. A stronger-than-expected jobs report could help limit near-term losses in the dollar index.
Sources: Fxstreet
THE ETERNAL SOVEREIGN 