Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined slightly against major currencies, while market participants continued to assess the impact of statements by Fed Chairman Jerome Powell and the latest US statistical data on the prospects for the Fed's monetary policy.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.19% to 106.12. Yesterday, Powell said that the economy is now stronger than the central bank expected in September, when he started lowering interest rates. In general, investors regarded his statements as a signal that the Fed prefers a slower pace of monetary policy easing in the future. Meanwhile, data from the ISM showed that the U.S. service sector growth slowed by more than anticipated in the month of November. Services PMI fell to 52.1 from 56.0 in October. Economists had expected a decline to 55.5. The bigger than expected pullback by the headline index came as the business activity index slid to 53.7 from 57.2 in October and the new orders index slumped to 53.7 from 57.4. As a result, markets slightly increased the chances of easing the Fed's monetary policy at the December meeting. According to the CME FedWatch Tool, markets see a 74.0% probability of a 0.25% rate cut in December (compared to 66.5% a week ago), while the probability of an additional rate cut in January is only 17.4%. But these expectations may change significantly after tomorrow's publication of nonfarm payrolls report for November. Economists expect that employment growth accelerated to 200 thousand from 12 thousand in October, and the unemployment rate increased by 0.1% to 4.2%.

The euro rose 0.3% against the US dollar, but remained near the two-year low reached at the end of November amid political instability in France. Yesterday, French lawmakers passed a no-confidence vote against the government, plunging the country even deeper into a crisis that threatens its ability to pass laws and contain a huge budget deficit. Economists said that recent events in France mean that political uncertainty will persist and continue to put pressure on business and consumer confidence, while it is likely that France will remain without a government for several weeks, if not months. Asked if the ECB would intervene to help France in the event of increased market turbulence, ECB President Christine Lagarde replied only that financial stability was an important factor in price stability. She also said that economic growth in the eurozone may be weaker in the coming months, and downside risks dominate in the medium term.