The U.S. dollar showed gains against most major trading partners on Friday, with the notable exception of the yen, as markets absorbed the Federal Open Market Committee’s (FOMC) recent decision to cut the federal funds rate.
This monetary policy adjustment comes amidst anticipation over possible shifts under the incoming administration, although Federal Reserve Chairman Jerome Powell emphasized that election results will not impact the Fed’s near-term policy decisions.
Chairman Powell reassured markets that the Fed’s monetary stance remains independent, including rate adjustments expected in the upcoming December meeting. He further stated he has no intention of resigning if requested by President-Elect Trump, asserting his belief that the president lacks authority to dismiss or demote Fed officials under current U.S. law.
The U.S. dollar index, which tracks the dollar against a basket of six major currencies, failed to sustain its brief breakout above 104.719, a significant Fibonacci retracement level, closing below its high of 106.13 from early November.
Summary of Forex Activity
USD/EUR: The dollar held steady against the euro, with the exchange rate at 1.0783, down from 1.0802 on Thursday but still above the Thursday morning level of 1.0760. The next European Central Bank (ECB) meeting is set for December 12, with no Eurozone data releases scheduled for Friday.
GBP/USD: The pound softened against the dollar, falling to 1.2960 from 1.2984 on Thursday. However, it remained above its Thursday morning level of 1.2930. The Bank of England is scheduled to meet on December 19, with no new UK economic data released on Friday.
USD/JPY: The dollar declined against the Japanese yen, dropping to 152.5051 from 152.8258 on Thursday and down from 153.9396 on Thursday morning. Japan’s recent data showed a decline in household spending for September, while leading and coincident indices rebounded from previous declines. The Bank of Japan will hold its next meeting on December 18-19.
USD/CAD: The dollar edged higher against the Canadian dollar, reaching 1.3902 from 1.3862 at Thursday’s close. The Canadian employment data for October, released on Friday, may influence this pairing ahead of the Bank of Canada’s December 11 meeting.
The Federal Reserve’s continued independence in policy-making, despite changes in government, reassures markets of a steady approach to monetary adjustments. However, the dollar remains under watch, with global economic data and upcoming central bank meetings likely to introduce further volatility in the currency markets.
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