Dollar Retreats as Fed Rate Cut Bets Rise Amid U.S. Data Delays

The U.S. dollar weakened in early Asian trade on Friday, leading declines among major currencies as investors reacted to signs of a slowing labor market and increased speculation of a Federal Reserve rate cut in December. The dollar index slipped 0.5% to 99.674, erasing its recent gains as traders ramped up expectations of monetary easing at the Fed’s next meeting on December 10.

With the U.S. government shutdown delaying the release of the official non-farm payrolls report, investors turned to private sector data that pointed to job losses in October, particularly in government and retail. The report also showed a surge in layoffs tied to cost-cutting and growing adoption of artificial intelligence across industries. Westpac noted that the latest Challenger report signaled a jump in announced job cuts, suggesting a cooling U.S. labor market.

Despite growing market confidence in an upcoming rate cut, Chicago Federal Reserve President Austan Goolsbee urged caution, citing the absence of fresh inflation data during the shutdown. “When it’s foggy, let’s just be a little careful and slow down,” he told CNBC. The CME Group’s FedWatch tool showed a 70% probability of a rate cut next month, up from 62% a day earlier.

The dollar traded at 153.17 yen, up 0.1% after Japan reported a 1.8% annual rise in household spending for September, slightly below the 2.5% forecast. The Australian dollar held at $0.6479, while the New Zealand dollar edged up 0.1% to $0.5635. The offshore yuan was steady at 7.1233 per dollar.

Meanwhile, the British pound traded flat at $1.3135 after the Bank of England left rates unchanged in a narrow 5-4 vote, with Governor Andrew Bailey casting the deciding vote. The euro remained near a one-week high at $1.1550.