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Investing.com – The US dollar experienced a minor decline on Thursday amidst rising anticipation of an impending interest rate cut by the Federal Reserve, while the euro saw a slight increase ahead of the European Central Bank’s policy meeting.
At 04:50 ET (09:50 GMT), the Dollar Index, which measures the dollar’s performance against a selection of six other currencies, was down 0.1% at 106.245.
Likelihood of Fed Rate Cut Next Week
Recent consumer price index data released on Wednesday met market expectations, leading to bolstered predictions regarding a potential interest rate reduction by the Federal Reserve during its upcoming meeting. Additional inflation metrics are anticipated later in the session, particularly for November.
Analysts at ING commented, “The CPI findings did not present any surprises, and the consensus has strengthened around a 25 basis point cut by the Fed next week. This adjustment is viewed as the Fed seizing the opportunity to implement a less restrictive monetary policy while the circumstances allow.”
Since September, the Federal Reserve has already reduced interest rates by a total of 75 basis points, and the market presently forecasts another cut of 25 basis points during the forthcoming meeting on December 17-18.
Euro Awaits ECB Decision; Swiss Franc Declines Post-Cut
The European market took center stage, with the euro rising 0.2% to 1.0516 ahead of Thursday’s pivotal policy meeting by the European Central Bank, its last of the year.
Analysts predict that the ECB will likely endorse an additional 25 basis point rate cut, marking its fourth reduction this year as the central bank contends with an economy in the eurozone that faces risks of recession, political uncertainties, and emerging trade tensions with the United States.
This meeting is also expected to feature new quarterly projections on economic growth and inflation from the ECB.
“We anticipate some downward revisions to both growth and inflation forecasts could emerge today,” noted ING. “Currently, the market forecasts suggest ECB rates may be adjusted to accommodative levels below 2% by summer. There remains the potential for further downward adjustments in this pricing. Overall, our outlook for EUR/USD remains negative, with caution against any aggressive pushback from the ECB regarding current market expectations.”
The British pound traded 0.1% higher at 1.2761, while the Swiss franc also gained 0.2% to 0.8857 following a significant interest rate cut of 50 basis points by the Swiss National Bank in an effort to control the currency’s appreciation.
This reduction represents the largest drop in borrowing costs since the SNB’s emergency measure in January 2015, which followed the bank’s decision to abandon its minimum exchange rate policy with the euro.
Chinese Yuan Turns Focus to CEWC Meeting
In the Asian market, the Chinese yuan edged up 0.1% to 7.2675 as attention shifted to China’s Central Economic Work Conference (CEWC), a significant two-day event set to wrap up later on Thursday.
This conference is crucial as it addresses critical issues facing China, such as sluggish growth, declining consumption, and pressures from international trade disputes.
Reports indicate that China’s leadership is considering the option of devaluing the yuan in 2025, anticipating the potential for heightened US tariffs should Donald Trump return to the presidency next month, according to Reuters.
The Japanese yen appreciated 0.1%, reaching 152.50, while the Australian dollar saw an increase of 0.7% to 0.6513, following data that revealed a larger-than-expected rise in the country’s exports for November, in contrast to an unexpected decrease in imports.
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