Dollar Dips on Fed's Dovish Signals: Euro and Sterling Surge

The U.S. dollar is set for its third consecutive weekly decline driven by expectations of interest rate cuts next year. This prospect has bolstered the euro and sterling. Meanwhile, market uncertainties remain over future U.S. monetary policy and inflation trends.

The U.S. dollar neared its third consecutive weekly decline as prospects of future interest rate cuts diminished its value, while the euro and sterling reached their highest levels since October. The Federal Reserve, having pushed back against hawkish market expectations, contributed to the dollar's continued weakness.

This week, the Fed cut rates, but Chairman Jerome Powell's comments were seen as dovish, reinforcing selling pressure on the dollar. Investors face uncertainty with future monetary policy, as inflation and labor market outlooks remain ambiguous. Speculation surrounds potential rate cuts, in contrast to the Fed's projections.

The dollar index is on track for a 0.7% decrease this week, amid concerns of central bank independence. Other currencies, such as the yen, Australian dollar, and Swiss franc, saw varying performances as global markets react to diverging monetary policies.