Weekly Analysis

The U.S. dollar index stabilized near 99.6, ending a three-day decline as signs of a deal to end the record-long government shutdown emerged. While the dollar weakened earlier in the week on soft consumer sentiment and rising job cuts, support returned as Senate leaders signaled progress toward a temporary budget. The market remains split on the Fed’s December decision, with 67% odds for a 25bps cut.

The dollar index climbed for a third consecutive session on Friday to near 99.8, its highest since early August, closing October with a 1.8% monthly gain. Despite delivering a 25bps rate cut, the Federal Reserve struck a cautious tone, with Chair Powell signaling that a December cut isn’t guaranteed, cutting market odds to 63% from 90%.

The dollar index slipped to 98.8 on Friday after all major U.S. inflation readings came in below expectations, reinforcing bets on Federal Reserve rate cuts next week and again in December. The delayed CPI report, released after the government shutdown, showed headline inflation at 3.0%, slightly under forecasts, while core inflation eased.

The dollar index pulled back toward 99.6 last week, extending its decline from three-week highs as markets absorbed the Federal Reserve’s dovish tone, softer U.S. data, and persistent geopolitical caution. Meanwhile, the euro climbed to its highest since early October, supported by easing French political tensions and improved investor confidence across the Eurozone.

The dollar index fell below 99 on Friday, pressured by rising geopolitical tensions and trade war fears after US President Trump canceled plans to meet China’s Xi Jinping and threatened steep new tariffs. Sentiment remained fragile, despite a slight improvement in US consumer morale.

The dollar index dropped to 97.7, down 0.5% for the week, as soft private labor data, stagnant ISM services, and a government shutdown disrupted markets and reinforced expectations of two more Fed cuts this year. Markets grew increasingly concerned over slowing growth and job market weakness, especially as the BLS jobs report was delayed.

The dollar index dipped slightly to 98.3 on Friday but stayed close to a three-week high, as strong US economic data tempered expectations for aggressive Fed rate cuts. August consumer spending and core PCE inflation came in hot, suggesting persistent inflation pressures despite signs of labor market cooling.

The Federal Reserve cut interest rates by 25 bps, bringing the federal funds rate to the 4.00%–4.25% range. Policymakers signaled two more cuts in 2025 and one in 2026, slightly above previous guidance. Chair Powell described the move as a “risk management” cut, highlighting labor market risks while emphasizing there are “no risk-free paths.”