Dollar Sees Support from Positive Empire Report and Reduced Fed Rate-Cut Expectations

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) increased by +0.25% due to the unexpected rise in the Nov Empire manufacturing general business conditions survey, reaching a 1-year high [1][2] - The Nov Empire manufacturing survey rose by +8.0 to a level of 18.7, significantly stronger than the expected decline to 5.8 [2] - The probability of a Fed rate cut at the upcoming FOMC meeting decreased to 41% from 70% earlier in the month, influenced by comments from Fed presidents favoring steady interest rates [1][3] Group 2: Euro and ECB Insights - The EUR/USD pair declined by -0.30% as the euro faced pressure from a stronger dollar and comments from ECB Vice President Luis de Guindos regarding elevated financial stability risks in the Eurozone [4][6] - The European Commission raised its 2025 Eurozone GDP forecast to +1.3% from +0.9%, while maintaining the inflation forecast at +2.1% [5] - The ECB is perceived to be nearing the end of its rate-cut cycle, contrasting with the Fed's expected rate cuts through the end of 2026 [5] Group 3: Japanese Economy and Yen Performance - The USD/JPY pair increased by +0.21% as the yen was pressured by news of a significant contraction in the Japanese economy in Q3, prompting discussions for an ambitious stimulus package [7] - An upward revision to Japan's September industrial production provided some support for the yen [7] - The yield on the 10-year Japanese government bond rose to a 17-year high of 1.737%, which is supportive for the yen [7]