Slight Decline in the Dollar Index

Chicago Fed President Goolsbee stated that as the Federal Reserve approaches what it considers the neutral level of monetary policy, slowing the pace of interest rate cuts is "completely prudent." In an interview, Goolsbee remarked, "To understand what the neutral level is and what is restrictive, you need to look around and see how conditions are performing. You can't achieve this in two weeks; it takes some time. So slowing down in this context makes sense." Goolsbee, a voting member of the Federal Open Market Committee (FOMC) in 2025, has been one of the more outspoken doves among the Fed. On Monday, he indicated that it is "obvious" the Fed is "on a path that will lead to lower rates, closer to what you might call neutral." His comments echoed those made by Fed Chair Powell following the interest rate decision on November 7, during which Powell said that slowing the pace of easing might be appropriate as the Fed approaches neutral interest rates.

Additionally, driven by expectations of declining inflation and increasing employment, American consumers' outlook on the economy showed slight improvement in November. According to data released by The Conference Board on Tuesday, the Consumer Confidence Index rose modestly from 109.6 in October to 111.7 in November. While the increase is small, it follows a significant rise in October, indicating that consumer confidence continues to steadily improve. Although The Conference Board's survey did not break down consumer responses by political party, another consumer sentiment survey from the University of Michigan showed a marked increase in optimism among Republican voters regarding the economy post-election. Furthermore, the proportion of the public expecting the U.S. economy to fall into recession within the next 12 months dropped to its lowest level since the question was first posed in July 2022, reflecting a boost in public confidence about the economic outlook.

Advertisement

Today's data to watch include Germany's December GfK Consumer Confidence Index, the revised annualized quarterly growth rate of U.S. GDP for Q3, preliminary monthly durable goods orders for October, the number of initial jobless claims for the week ending November 23, U.S. personal spending month-on-month for October, and the month-on-month change in the seasonally adjusted index of pending home sales for October.

U.S. Dollar Index

The U.S. Dollar Index fluctuated and consolidated yesterday, closing slightly lower, with the spot price trading around 106.80. In addition to ongoing profit-taking pressure on the exchange rate, a cooling of trade concerns has also significantly impacted the dollar index's retreat. Additionally, the lingering expectations of a rate cut by the Federal Reserve in December have further weighed on the exchange rate. Economic data released during the period were mixed, having limited influence on the market. Today, pay attention to resistance around 107.30, with support near 106.30.

EUR/USD

The euro moved upward in fluctuations yesterday, closing slightly higher, with the spot price trading around 1.0490. In addition to short covering providing some support for the exchange rate, the dollar index's continued decline due to various negative factors has also played a significant role in supporting the euro's rise. However, expectations for a 50 basis point rate cut by the European Central Bank in December have limited the rebound potential of the exchange rate. Today, focus on resistance around 1.0600, with support near 1.0400.

GBP/USD

The pound traded upward in fluctuations yesterday, closing slightly higher, with the spot price around 1.2570. Apart from short covering providing some support for the exchange rate, the dollar index weakened under the impact of the Federal Reserve's December rate cut expectations and eased trade concerns, which has also been important for the pound's rebound. Additionally, a cooling of rate cut expectations for the Bank of England has given some support to the pound. However, the weak performance of economic data released in the UK during this period has limited the rebound potential of the exchange rate. Today, watch for resistance around 1.2650, with support near 1.2500.