U.S. Dollar Eases Slightly from One-Year High as Market Awaits Fed Commentary

The U.S. dollar retreated modestly on Monday from a one-year high, entering a week with few significant economic data releases but multiple Federal Reserve speeches. At 04:50 ET (09:50 GMT), the Dollar Index, which measures the greenback against six major currencies, dipped 0.1% to 106.497, slightly off the peak of 106.72 achieved recently. The index has been on a strong upward trajectory, posting gains in six of the past seven weeks, with a 1.6% rise last week alone.

Ongoing Dollar Strength

The dollar’s rally has been driven by a structural shift towards a bullish outlook, bolstered by favorable macroeconomic conditions and continued support since Donald Trump’s election. This momentum has persisted, with no significant economic developments to alter this positive trend.

This week, investors will pay close attention to at least seven scheduled speeches by Federal Reserve officials. Kicking off the week will be Chicago Fed President Austan Goolsbee, known for a dovish stance. However, most Fed members are anticipated to maintain a cautious tone on the potential for aggressive rate cuts. Market pricing currently indicates a 60% probability of a 25-basis-point rate reduction in December, with futures reflecting expectations of just 77 basis points in total cuts by late 2025, a notable decline from over 100 basis points anticipated earlier.

Euro Inches Higher as ECB Officials Prepare to Speak

The euro (EUR/USD) gained 0.3%, trading at 1.0568, ahead of upcoming speeches from European Central Bank (ECB) leaders, including President Christine Lagarde. Despite slightly stronger-than-expected eurozone growth in the third quarter at 0.4%, the region’s economic outlook remains fragile, especially due to ongoing weakness in Germany. Analysts expect dovish signals from ECB officials, who must also consider trade risks tied to President Trump’s policy decisions.

Focus on Upcoming Eurozone and U.K. Economic Data

The week will conclude with the release of eurozone PMI activity data, an important gauge for economic health, which traders will analyze carefully.

Meanwhile, the British pound (GBP/USD) edged up to 1.2622 in anticipation of U.K. inflation figures for October, set to be released on Wednesday. Economists forecast the annual inflation rate to have risen to 2.2%, up from September’s 1.7% and breaching the Bank of England’s 2% target for the first time in over three years. Following a recent 25-basis-point rate cut, the Bank of England has signaled a gradual approach to further easing, particularly in light of Britain’s new government’s fiscal policies.