Daily Market Update
December 04, 2025EUR/USD ranged from the mid to high 1.16’s overnight. The U.S. dollar edged lower as lackluster data appeared to cement the case for a Federal Reserve rate cut next week, while the yen gained on expectations that the Bank of Japan will raise rates this month.
Investors have also been weighing the prospect of White House economic adviser Kevin Hassett taking over as Fed Chair after Jerome Powell’s term ends in May. Hassett is expected to push for more rate cuts.
U.S. President Donald Trump said this week he will unveil his pick to succeed Powell early next year, extending a months-long selection process despite previously claiming he had already decided on a candidate.
“The market thinks we’ll get a more dovish Fed chair with Hassett,” Danske Bank analyst Kirstine Kundby-Nielsen said.
A move to appoint Hassett could pressure the dollar, analysts have said, with bond investors expressing concerns to the U.S. Treasury that Hassett could aggressively cut rates to align with Trump’s preferences, the Financial Times reported.
Traders are pricing in an 85% chance of a quarter-point rate cut next week, LSEG data showed.
“A Fed rate cut next week is already priced in,” Commerzbank FX analysts Thu Lan Nguyen and Antje Praefcke wrote in a note.
“What will be decisive for the dollar, though, is whether there will be new hints regarding the direction of monetary policy in subsequent meetings.”
The dollar index , which measures the U.S. currency against six rivals, was down 0.1% at 98.786, its tenth straight down day. It was languishing near a five-week low and remains down nearly 9% for the year.
A Reuters survey showed a sizeable minority of FX strategists are now predicting the dollar will strengthen next year, although most largely stuck to forecasts for a softer greenback in 2026 on rate-cut wagers.
The euro rose less than 0.1% to $1.1678, touching its strongest level since October 17 and extending gains after data on Wednesday showed business activity in the euro zone expanded at its fastest pace in 30 months in November.
The currency is up more than 12% this year, on pace for its biggest annual gain since 2017, benefiting from a weak dollar due to tariff uncertainties earlier in the year and lately on rising odds of U.S. rate cuts.
The European Central Bank is due to meet in two weeks and is broadly expected to stand pat on rates, with markets pricing in only a one-in-four chance of any easing next year.
The yen was up 0.4% at 154.56 per dollar, on expectations that the Bank of Japan will raise rates when it meets later this month.
Three government officials told Reuters that the BOJ is likely to raise rates in December, although what comes after remains uncertain, with markets only fully pricing in one more rate hike next year and around a 50% chance of another.
“A still cautious BOJ, attractive carry for long dollar/yen and persistent topside pressure to JGB yields on potential fiscal expansion is likely to keep the pressure on yen weakness,” Chidu Narayanan, head of macro strategy in APAC at Wells Fargo, said.
Sterling was at $1.3359, hovering near its highest point since October 28. The Swedish crown dipped against the euro and dollar after the pace of annual inflation slowed in November.
China’s yuan weakened slightly but was near a 14-month high after the central bank set a weaker-than-expected official midpoint for the sixth consecutive session, signaling caution over rapid appreciation.
China’s major state-owned banks bought dollars in the onshore spot market this week to rein in yuan strength, sources told Reuters.
The yuan has shrugged off a trade war, slow growth, rock-bottom interest rates and a slump in foreign investment, to head for its since the pandemic year of 2020.
Source: Reuters
