The US Dollar Index (DXY) is trading weaker near 98.55 in Thursday’s Asian session, extending its decline after the Federal Reserve delivered a rate cut at its December meeting. The move marks the third consecutive reduction since September and continues to weigh on USD sentiment.
As widely expected, the Fed lowered its benchmark rate by 25 basis points to a target range of 3.50% – 3.75%. Chair Jerome Powell reiterated that policymakers are now “well positioned to wait and see” how economic conditions unfold, adding that a rate hike is not part of the central bank’s baseline outlook.
The Fed’s updated projections show expectations for just one rate cut next year, unchanged from September, while the policy statement signaled a preference for remaining on hold in the near term. The softer policy tone has pressured the DXY, which continues to drift lower.
Market pricing and data ahead
According to the CME FedWatch tool, markets are now pricing a 78% probability that the Fed will keep rates unchanged at the next meeting, up from 70% before the rate announcement.
Attention now turns to the US Initial Jobless Claims data due later on Thursday. Economists expect claims to rise to 220,000 from 191,000 previously. A stronger-than-expected print could help cushion USD losses, while a weaker reading may reinforce the post-Fed downside bias.
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