The U.S. dollar edged lower on Tuesday, pressured by fresh dovish comments from the Federal Reserve as markets braced for a wave of economic releases that could influence policymakers’ final rate decision of 2025.
Around 04:15 ET (09:15 GMT), the Dollar Index eased 0.1% to 99.410, resuming its broader slide after a brief pause at the start of the week.
Waller’s Warning Sends the Dollar Lower
The greenback lost momentum after Fed Governor Christopher Waller highlighted signs of stress emerging in the labor market and renewed his call for another quarter-point rate cut at the December 9–10 meeting.
“Four to six weeks ago, we were still in this kind of no-hire, no-fire mode,” Waller said in London. He noted that executives are increasingly saying “they’re starting to talk about layoffs. They’re starting to plan for them.”
He added: “It could be AI-related. It could be a lot of other things … It’s not just going to be ’no hire, no fire.’ At some point this is going to start happening.”
His comments contrasted with more cautious tones from other Fed officials, leaving markets unsure about the committee’s next step.
With the federal government reopened, a backlog of important indicators will be released this week, including Thursday’s September nonfarm payrolls.
ING analysts wrote: “Our base case remains that risks are tilted to the downside for the dollar once the U.S. data cycle kicks in, and we expect a December Fed cut to become the market’s base case again.”
Rate-cut odds now hover near 40%, down sharply from last week.
Euro Supported as ING Flags Upside Potential
EUR/USD crept higher to 1.1593, reversing a multi-session decline.
ING maintained an optimistic view, saying “upside risks for EUR/USD persist.”
The bank added: “Our year-end target remains 1.180… positive December seasonality could help smooth the move.”
Sterling slipped slightly to 1.3152 as traders awaited U.K. budget details from Finance Minister Rachel Reeves.
Yen Firms as Japanese Yields Touch Long-Time Highs
USD/JPY dropped 0.2% to 154.96 as the yen strengthened from nine-month lows.
Long-term Japanese government bond yields surged to levels not seen in decades, reflecting concerns that Prime Minister Sanae Takaichi’s expected fiscal package could further expand Japan’s debt load.
Reuters reported that Goushi Kataoka believes a stimulus package worth around $149 billion is needed to support the economy.
Elsewhere, USD/CNY rose 0.1% to 7.1117 while AUD/USD held steady at 0.6493.
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