The US Dollar Index (DXY), which tracks the Greenback against six major currencies, remains under pressure near the 98.50 level during Asian trading on Wednesday. The index is edging lower after posting modest gains in the previous session, as a risk-on mood in global markets dampens demand for the safe-haven US Dollar. Investors are now turning their focus to upcoming US economic data that could influence expectations for Federal Reserve (Fed) policy.
Market attention later in the day will center on the US ADP Employment Change report and the ISM Services Purchasing Managers’ Index for December. The spotlight, however, is firmly on Friday’s US Nonfarm Payrolls report, which is expected to show job growth of 55,000 in December, down from 64,000 in November.
Risk-on sentiment offsets geopolitical tensions
The US Dollar has failed to attract strong safe-haven inflows, with markets so far largely brushing aside escalating geopolitical risks. Investors appear to have absorbed news surrounding the recent US intervention in Venezuela and the reported capture of President Nicolas Maduro, allowing risk appetite to remain broadly supported.
This muted reaction highlights the market’s focus on monetary policy and macroeconomic signals rather than geopolitical developments, limiting any meaningful upside for the Greenback in the near term.
Fed uncertainty weighs on the Greenback
The Dollar is also facing headwinds from growing divisions within the Federal Reserve and uncertainty surrounding the future leadership of the central bank. US President Donald Trump’s anticipated nomination of a new Fed Chair has added another layer of ambiguity to the US monetary policy outlook.
According to the CME Group’s FedWatch tool, markets are pricing in an 82.8% probability that the Fed will leave interest rates unchanged at its January 27–28 meeting. However, expectations beyond that remain fluid, driven by mixed signals from policymakers.
Fed Governor Stephen Miran said on Tuesday that the central bank should cut interest rates aggressively this year to support economic momentum, while Minneapolis Fed President Neel Kashkari cautioned that the unemployment rate could “pop” higher. In contrast, Richmond Fed President Tom Barkin emphasized that future rate adjustments would need to be finely tuned to incoming data, citing risks to both employment and inflation objectives.
With policymakers striking a cautious and at times divergent tone, upcoming US data releases are likely to play a decisive role in shaping near-term Fed expectations and determining whether the US Dollar can find firmer footing from current levels.
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