Dollar Slides to Five-Week Low Amid Rate Cut Expectations

The U.S. dollar fell about 0.4% to its lowest level in five weeks, weighed down by disappointing job data that bolstered expectations for continued monetary easing by the Federal Reserve.

The decline followed the release of November’s ADP employment report, which pointed to a slowdown in the U.S. labor market, signaling potential support for a rate cut. However, the dollar found some intraday support after the Institute for Supply Management (ISM) services index rose to 52.6, its highest level in nine months, surpassing expectations of a decline to 52.0.

On the policy front, President Donald Trump recently announced he would reveal his pick for the next Federal Reserve chairman in early 2026. Kevin Hassett, chairman of the National Economic Council, is widely seen as the frontrunner. Hassett’s potential nomination could weigh on the dollar, given his perceived dovish stance and concerns about the Fed’s independence under a Trump-endorsed appointee.

In the housing market, U.S. mortgage applications fell 1.4% for the week ending November 28. The purchase index rose 2.5%, while the refinancing index dropped 4.4%. Meanwhile, the average 30-year fixed mortgage rate declined by 8 basis points to 6.32% from 6.40% the previous week.

Labor market data showed a surprise decline of 32,000 in nonfarm payrolls for November, the largest drop in over two and a half years, versus expectations for an increase of 10,000 jobs, highlighting weakness in the employment sector. Industrial production for September remained unchanged month-over-month, in line with forecasts.

Despite some support from a strong services sector, markets now assign a 94% probability that the Fed will cut rates by 25 basis points at its upcoming December 9–10 meeting, reflecting strong investor confidence in continued monetary easing.

Overall, the dollar faces a double challenge: weak labor market data and looming rate cuts, partially offset by resilience in the services sector.