The U.S. dollar reached a three-month high against the euro, continuing gains from last week due to skepticism about additional Federal Reserve rate cuts in 2025.
The Fed lowered interest rates by 25 basis points last week, but Chair Jerome Powell hinted this may be the final cut for the year, seeking clearer economic data before further easing.
Driving the news: The ongoing U.S. government shutdown has disrupted key economic data releases, including non-farm payrolls, complicating the outlook.
Market-implied probability of a December 25-basis-point rate cut dropped to about 70% from 94% a week ago.
Fed officials are divided, with some expressing discomfort over easing policy further, while others call for more aggressive cuts.
Go deeper: The euro slipped to its weakest level against the dollar since August, hitting $1.1505 before marginal recovery.
The dollar gained versus the Swiss franc and remained strong against the yen, which struggles amid interest rate differentials and recent gradual signals from the Bank of Japan about a possible rate hike.
Japanese authorities have intervened previously to support the yen as it approaches critical low levels.
Sterling declined amid rising market bets on Bank of England rate cuts following softer inflation data, with a rate decision pending this week.
The Australian dollar dipped slightly ahead of the Reserve Bank of Australia’s upcoming rate decision.
Bitcoin fell 2% to around $107,486 amid broader market movement and uncertainty.