During today's Asian trading, the US dollar declined markedly, retreating from the 2-year high reached on Friday. The pullback was caused by partial profit-taking and news that Donald Trump has chosen his future Treasury Secretary - fund manager Scott Bessent, who is an old Wall Street hand and a fiscal conservative. Meanwhile, experts have warned that the decline in the US dollar may be temporary, given that Bessent has been openly in favor of a strong dollar and has supported tariffs.
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 0.36% to 107.17. Last week, the index rose by 0.81%, and recorded the 8th consecutive weekly increase, as investors have recently weakened expectations about a possible rate cut by the Federal Reserve. This change is due to the perceived impact of Trump's legislative policies, such as tariffs, on the economy. Meanwhile, other central banks such as the European Central Bank (ECB) and the Bank of England are likely to become more aggressive in cutting interest rates to support their economies. According to the CME FedWatch Tool, markets see a 56.2% probability of a 0.25% rate cut in December (compared to 58.7% a week ago). Minutes of the Fed's last meeting, which will be presented tomorrow, will offer more color on the decision to cut by 0.5% and the discussion for future easing. US data expected this week (GDP report for the 3rd quarter, as well as the personal consumption expenditure price index (the Fed's preferred inflation indicator) for October), will further refine the outlook for rates.
The euro rose 0.35% against the US dollar after falling to a 2-year low on Friday amid disappointing data on eurozone PMI indices. Against this background, the markets took into account a more aggressive policy easing by the European Central Bank, while the probability of a 0.5% rate cut in December rose to 59%. Overall, market participants expect the ECB to cut the rate by 1.54% by the end of 2025, compared to just 0.65% from the Fed.