The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades on a softer footing near 98.25 during the early European session on Tuesday. The index remains under modest pressure as investors refrain from taking aggressive positions ahead of a heavy US data docket, led by the delayed US labor market report for November.
The US Nonfarm Payrolls (NFP) figures for October and November will be closely watched later in the day, as they are expected to provide fresh insight into the outlook for US monetary policy. Evidence of a cooling labor market would reinforce expectations that the Federal Reserve could deliver further rate cuts, weighing on the US Dollar. Conversely, a stronger-than-forecast reading could offer near-term support to the Greenback against its major peers.
Last week, the Federal Reserve delivered its third and final 25-basis-point rate cut of the year, lowering the benchmark interest rate to a target range of 3.50%–3.75%. According to the CME FedWatch tool, markets are currently pricing in nearly a 76% probability that the central bank will keep rates unchanged at its January 2026 meeting, broadly unchanged from the previous session.
Comments from Fed officials have reinforced the cautious policy outlook. New York Fed President John Williams said on Monday that monetary policy is well positioned heading into next year following last week’s rate cut, citing elevated risks to employment and easing inflation pressures. Meanwhile, Fed Governor Stephen Miran reiterated that current policy settings remain overly restrictive. Investors will continue to look to upcoming remarks from Fed policymakers for additional direction, with any unexpectedly hawkish signals likely to lend support to the DXY.
