The dollar softened broadly against major currencies as market participants evaluated the lagging impact of Federal Reserve policy adjustments, with growing evidence that earlier rate cuts were taking longer than expected to filter through to economic activity. Traders noted that recent business surveys and credit growth data suggested monetary policy transmission remained impaired, prompting a reassessment of the currency's year-end trajectory.
According to currency strategists, the euro gained ground as European Central Bank officials maintained a cautious tone on further easing, citing persistent stickiness in services inflation and resilient labor markets across core Eurozone economies. Meanwhile, the yen strengthened modestly after Bank of Japan board members reinforced expectations for a gradual but steady path toward policy normalization, with markets anticipating additional details on balance sheet reduction in early 2026. Sterling also advanced as UK economic data showed tentative signs of stabilization in the housing and manufacturing sectors.
Market analysts said cross-asset rebalancing flows were exacerbating intraday volatility, with institutional investors adjusting hedges and reducing risk exposure ahead of the holiday period. Gold continued trending higher as central bank buying from emerging market economies complemented safe-haven demand amid ongoing geopolitical uncertainties. Oil faced downward pressure from demand growth concerns in key Asian economies, while Bitcoin traded mixed as traders awaited further regulatory clarity from US authorities expected later this month.
Technical indicators suggest momentum has shifted against the dollar across major pairs, with traders watching key moving averages for confirmation of sustained directional moves. Forward-looking focus turns to the Fed's final meeting minutes of 2025, due for release later this week, which could provide additional color on policymakers' assessment of transmission mechanisms. Market participants are also positioning for US inflation data scheduled for mid-December, which may influence early 2026 rate expectations.
Disclaimer: This analysis is AI-generated for educational purposes. Traders should verify all information and conduct their own research before making trading decisions.