Dollar Slips on Stock Strength and Fed Rate Cut Expectations

Economic Indicators - The dollar index (DXY) decreased by -0.08% after reaching a 17-month low in the November MNI Chicago PMI, indicating weaker economic activity [1] - US weekly initial unemployment claims fell by -6,000 to a 7-month low of 216,000, suggesting a stronger labor market than anticipated [3] - September capital goods new orders, excluding defense and aircraft, increased by +0.9% month-over-month, surpassing expectations of +0.3% [3] - The November MNI Chicago PMI dropped by -7.5 to 36.3, marking the steepest contraction in 17 months and falling short of expectations of 43.6 [3] Federal Reserve Outlook - The Fed Beige Book presented mixed signals, with some contacts expressing concerns about slower activity while others showed optimism among manufacturers [4] - Markets are pricing in an 80% probability of a 25 basis point cut in the fed funds target range at the upcoming FOMC meeting on December 9-10 [4] Eurozone Developments - The EUR/USD pair rose to a 1-week high, increasing by +0.23%, driven by comments from ECB Governing Council member Boris Vujcic regarding balanced risks to economic growth and inflation [5] - Uncertainty surrounding the Russian-Ukrainian peace plan is limiting euro gains, as European Commission Vice President Kallas indicated a lack of signs from Russia indicating a desire for peace [6] - Swaps are pricing in a 1% chance of a 25 basis point rate cut by the ECB at the December 18 policy meeting [6] Potential Leadership Changes - The dollar is under pressure due to reports that Kevin Hassett is a leading candidate to replace Jerome Powell as US Fed Chair, with his dovish stance potentially being bearish for the dollar [2]