The dollar accelerated its decline through Friday’s New York session, pressured by heavy month-end selling from institutional portfolios and renewed speculation that the Federal Reserve has concluded its easing cycle. Traders noted the greenback’s weakness was particularly pronounced against European currencies, with the euro and sterling gaining momentum as policy divergence narratives resurfaced.
Market participants attribute the dollar’s softness to a combination of technical positioning and fundamental shifts. "We’re seeing classic month-end rebalancing, but it’s amplified by growing conviction that the Fed is done cutting," said senior currency strategist at a major European bank. The November FOMC minutes, released earlier this week, revealed committee members debating whether inflation risks warranted a more measured approach to further rate reductions, prompting markets to pare back easing expectations for 2025.
Across the Atlantic, European Central Bank officials have struck a more hawkish tone, with several governing council members warning against premature rate cuts despite cooling inflation. This contrast has breathed life into the euro, which had languished for much of the autumn. Meanwhile, the pound has drawn support from improved UK fiscal metrics and expectations that the Bank of England will maintain its restrictive stance longer than previously anticipated. In Asia, the yen exhibited heightened volatility as Bank of Japan policymakers continued signaling gradual normalization, though traders remain skeptical about the pace of future hikes given Japan’s fragile growth outlook.
Commodity markets reflected the dollar’s travails, with gold trending higher as investors sought portfolio hedges amid uncertainty over the US policy trajectory. Oil prices firmed on reports of stronger-than-expected compliance with OPEC+ production cuts, while Bitcoin maintained its upward bias following recent institutional inflows. Looking ahead, traders are watching momentum indicators that suggest the dollar’s decline may extend into early December, particularly if upcoming US employment data disappoints. The next major catalyst arrives next week with eurozone inflation figures and a slate of Fed speaker appearances that could crystallize policy expectations.
Disclaimer: This analysis is AI-generated for educational purposes. Traders should verify all information and conduct their own research before making trading decisions.