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Dollar Wobbles: Fed Rate Cut Fears Clash with OECD Optimism
4 Dec
Summary
- Dollar index up slightly, influenced by rising T-note yields.
- OECD raises US 2025 GDP forecast, but Fed rate cut expectations weigh.
- Euro gains on divergent central bank policies and improved GDP outlook.
The dollar index experienced a minor uptick, supported by rising T-note yields and a more favorable US GDP forecast from the OECD. However, widespread anticipation of a Federal Reserve rate cut at the upcoming FOMC meeting is tempering further dollar appreciation. The market is largely pricing in a 25 basis point reduction in the fed funds target range.
The OECD revised its US 2025 GDP forecast upward to 2.0% from 1.8%, attributing global economic resilience to AI investment and supportive policies. Despite this positive outlook for the US economy, expectations for imminent Fed rate cuts continue to influence currency markets.
Concurrently, the euro exhibited strength against the dollar, benefiting from diverging central bank strategies. The European Central Bank is seen as having concluded its rate-cutting cycle, contrasting with the expected continued easing by the Federal Reserve. Improved Eurozone CPI data and a raised GDP forecast from the OECD further bolstered the euro.
