The US dollar weakened slightly ahead of a key week for global central banks, with the Fed expected to cut interest rates despite differences in views among policymakers. Four other central banks, including Australia, Brazil, Canada and Switzerland, are also meeting but are not expected to change policy.
Analysts expect the Fed to deliver a hawkish message despite cutting rates. This is likely to reduce expectations for additional cuts next year. While the dollar has weakened for the past three weeks, market players have reined in long positions in the US dollar.
US economic data was mixed with the labor market slowing despite overall growth being strong, fiscal stimulus still in the pipeline and inflation well above the Fed’s target. These factors may limit the scope for additional rate cuts.
In Europe, the euro strengthened on rising bond yields. The ECB is expected to keep rates on hold and potentially raise rates, according to Isabel Schnabel. German 30-year bond yields are now at their highest since 2011.
On the other hand, the Australian dollar steadied after touching its highest since September, while the Canadian dollar traded near a 10-week high. The yen weakened slightly again, and sterling remained steady.
