Rich Asplund
Mon, December 1, 2025 at 8:50 AM MST 5 min read
The dollar index (DXY00) today is down by -0.33% at a 2-week low. The yen’s strength is weighing on the dollar today after BOJ Governor Ueda signaled a possible interest rate hike at this month’s policy meeting. Also, today’s weaker-than-expected Nov US ISM manufacturing index is bearish for the dollar. In addition, the dollar is under pressure amid expectations for a Fed rate cut at next week’s FOMC meeting, as the swaps market now discounts a 100% chance of a rate cut at the Dec 9-10 FOMC meeting.
The dollar is being undercut on negative carryover from last Tuesday when Bloomberg reported that Kevin Hassett is at the top of the list of potential candidates to succeed Jerome Powell as US Fed Chair. Hassett’s nomination would be bearish for the dollar as he is seen as the most dovish candidate. Also, Fed independence would come into question, as Hassett supports President Trump’s approach to cutting interest rates at the Fed, which Trump has long sought to control.
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The US Nov ISM manufacturing index unexpectedly fell -0.5 to a 4-month low of 48.2, weaker than expectations of an increase to 49.0. The Nov ISM price paid sub-index unexpectedly rose +0.5 to 58.5, stronger than expectations of a decline to 57.5 and a sign of lingering price pressures.
The markets are discounting a 100% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) today is up by +0.32% at a 2-week high. Today’s weaker dollar is supporting gains in the euro. Also, hawkish comments today from ECB Governing Council member and Bundesbank President Nagel were bullish for the euro, where he said Eurozone interest rates were in a good place. In addition, divergent central bank policies are supportive of the euro, with the ECB having finished with its rate-cutting cycle while the Fed is expected to keep cutting interest rates.
The Eurozone Nov S&P manufacturing PMI was revised downward by -0.1 to 49.6 from the previously reported 49.7, the steepest pace of contraction in 5 months.
ECB Governing Council member and Bundesbank President Nagel said, “Our projections suggest that interest rates in the Eurozone are currently in a good place.”
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