Dollar Soft as Fed Doves Lift Cut Odds to 75%; Yen Slumps Again – Action Forex
Dollar is trading on the back foot today as markets add to bets on a December Fed rate cut, extending the repricing that began late last week. The shift was triggered by New York Fed President John Williams, who surprised markets last Friday by saying he sees room for a further “near-term adjustment,” reversing the hawkish tone embedded after the FOMC minutes.
Known dove Governor Christopher Waller reinforced the message today, saying a December cut is “appropriate” given continued labor-market softening and easing inflation pressures. He did note that January could be less straightforward due to the flood of delayed data, but markets latched onto the December signal. Fed funds futures now imply more than a 75% chance of a 25bps move next month, putting Dollar on the defensive.
Yen, however, is even weaker, continuing to unwind Friday’s rebound. Traders remain unmoved by verbal intervention efforts, including remarks from Takuji Aida—an influential private-sector member of a key government panel—who told NHK that Japan has “excessive foreign reserves” and should actively tap them for Yen-buying intervention. Markets have heard similar warnings many times recently and continue to fade them.
Meanwhile, a new nationwide Yomiuri Shimbun poll shows strong public backing for Prime Minister Sanae Takaichi. Her cabinet’s approval rating stands at 72%, essentially unchanged from its launch, and 74% of respondents support her pledge for “responsible, active fiscal policy.” High public approval strengthens her political leverage.
That public support makes it even harder for BoJ to push back against Takaichi’s preference to delay rate hikes, even as wage momentum and inflation persistence argue for gradual normalization. Political constraints remain one of the key reasons Yen continues to trade heavy, with markets skeptical that BoJ can accelerate tightening while fiscal stimulus remains the dominant policy tool.
Across the currency markets today, Euro leads the majors, followed by Sterling and Swiss Franc. At the other end, Yen is the weakest performer, with Loonie and Dollar also lagging. Aussie and Kiwi sit in the middle of the pack.
In Europe, at the time of writing, FTSE is up 0.29%. DAX is up 0.75%. CAC is up 0.13%. UK 10-year yield is flat at 4.551. Germany 10-year yield is up 0.005 at 2.712. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 1.97%. China Shanghai SSE rose 0.05%. Singapore Strait Times rose 0.62%.
Fed’s Waller backs December cut, says January depends on data flood
Fed Governor Christopher Waller signaled clear support for a December rate cut, saying most private-sector and anecdotal data since the last FOMC meeting show little improvement in economic conditions. He noted that the labor market “is soft” and “continuing to weaken,” with inflation expected to ease, creating an environment where another cut next month is appropriate.
Waller said the January meeting presents more uncertainty, as the Fed will receive a “flood of data” that had been delayed by the government shutdown. If those releases align with recent trends—softening labor conditions and moderating inflation—then a case for another cut could be made. “But if it suddenly shows a rebound in inflation or jobs or the economy’s taking off, then it might give concern,”” he added.
Beyond policy, Waller confirmed he met recently with Treasury Secretary Scott Bessent to discuss his potential nomination as the next Fed Chair, as the Trump administration moves to select a successor to Jerome Powell. Waller said the meeting went “great,” and argued that the administration is seeking someone with “merit, experience, and knows what they are doing,” adding, “I think I fit that.”
Powell’s term ends in May, leaving a narrow window for the White House to finalize its choice.
German Ifo falls to 88.1, firms see little prospect of near-term rebound
Germany’s business mood softened in November as the Ifo Business Climate Index edged down to 88.1 from 88.4, missing expectations of 88.5. The decline was driven mainly by weaker expectations, which dropped from 91.6 to 90.6. Assessment of current conditions improved slightly from 85.3 to 85.6.
Sector details remained broadly negative. Manufacturing slipped further from -12.1 to -12.5, reflecting sustained weakness in global demand and the lingering impact of U.S. tariff. Services eased from 2.9 to 2.6, hinting at a moderation in domestic resilience. Trade deteriorated from -20.4 to -21.4 and construction fell from -14.4 to -15.7. Together, these readings signal a still-fragile backdrop with limited catalysts for improvement heading into year-end.
Ifo noted that sentiment among German firms has deteriorated as companies grow more pessimistic about the medium-term outlook. While current conditions improved slightly, businesses “have little faith that a recovery is coming anytime soon.”
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1485; (P) 1.1519; (R1) 1.1547; More…
Intraday bias in EUR/USD is turned neutral first with today’s recovery and some consolidations could be seen above 1.1490. Nevertheless, risk will stay on the downside as long as 1.1655 resistance holds. Below 1.1490 and 1.1467 will resume the whole decline from 1.1917 high. Next targets are 1.1390, and then 38.2% retracement of 1.0176 to 1.1917 at 1.1252.
In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1328) holds, the up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.