U.S. Dollar Index Hovers Near 99.60 as December Rate Cut Odds Slip Below 50%

Market Overview

The U.S. Dollar Index (DXY) steadied around 99.60 during Wednesday’s European session, following a three-day uptick. While the dollar’s recent push higher has lost some momentum, it remains underpinned by fading expectations for a Federal Reserve rate cut in December. Market participants are increasingly cautious, reloading for critical economic data that could reshape the Fed’s policy outlook.

Fed Rate Cut Odds Fade

According to the CME FedWatch Tool, traders now assign just a 49% probability to a 25-basis-point Fed rate cut in December — a significant drop from 63% just a week ago. This decline in expectations reflects growing concern that the Fed may hold off on further easing, particularly amid uncertainty about inflation and labor market trends.

Richmond Fed President Thomas Barkin added a hawkish nuance to the debate, acknowledging improvements in labor supply but warning that inflation’s path back to the Fed’s 2% target remains highly uncertain. Barkin emphasized the challenge of reaching internal policy consensus without clearer economic signals.

Mixed Labor Market Data

Recent U.S. data has painted a somewhat mixed picture on the labor front. Initial Jobless Claims rose to 232,000 for the week ending October 18, suggesting some softness in the jobs market. At the same time, ADP payroll figures showed average weekly job losses of roughly 2,500 over the four-week stretch to November 1, indicating weakening private-sector hiring momentum.

These divergent signals have left investors wrestling with whether the Fed will feel compelled to ease or remain on the sidelines — especially as Powell & Co. weigh the risks of acting prematurely.

Political Overhang: Trump’s Fed Commentary

In a separate development, former President Donald Trump said in an Oval Office-style interview that he “would love” to remove Fed Chair Jerome Powell immediately. He added that he has “several surprising names” under consideration as a successor, alongside more conventional picks. While such remarks may not carry immediate policy weight, they inject an added layer of political uncertainty into markets already sensitive to Fed direction.

Technical Outlook

Technically, the DXY appears to be in a consolidation phase just under the 100.00 threshold. With support likely around 99.00–99.20 and resistance looming near 100.00–100.20, the index could trade in a relatively tight range unless a new catalyst — such as fresh economic data — drives a breakout. The recent pause might simply reflect investor caution as they await more clarity on Fed policy.

What Traders Are Watching

• Nonfarm Payrolls Report (September): Due Thursday, this release is expected to offer a sharper read on U.S. employment and could swing market views on Fed easing.
• Inflation Data: Any surprise in consumer or producer price inflation could force the Fed’s hand.
• Fed Speaker Commentary: Additional remarks from Fed officials may provide color on internal debate, especially after Barkin’s comments.
• Treasury Yields: Moves in U.S. bond markets will be closely watched, as rising yields could bolster the dollar.
• Political Developments: Trump’s remarks on Powell’s removal inject uncertainty; any follow-up could rattle markets.

Summary

The U.S. Dollar Index remains firm around 99.60 as expectations for a December Fed rate cut decline. Mixed labor data and caution from Fed policymakers like Thomas Barkin have weighed on easing odds, while political drama — including Donald Trump’s comments about replacing Fed Chair Jerome Powell — adds a wildcard. With key economic releases on deck, traders appear to be holding their breath, awaiting a clearer signal on where the Fed goes from here.

Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Market conditions and analysis may change, so consult a licensed financial professional before making any investment decisions.