The US dollar lost ground against key rivals like the Japanese yen and the Swiss franc on Monday, December 15, setting the stage for a week dominated by critical central bank announcements and a long-awaited dump of US economic data.
Central Banks Take Centre Stage
The Bank of Japan (BoJ) is widely anticipated to raise interest rates this Friday, providing a potential boost to the yen. Analysts at Goldman Sachs confirmed they now expect a December hike from the Japanese central bank. According to sources, while the BoJ is likely to maintain its commitment to further rate increases, it may emphasise that the pace will be gradual and data-dependent.
Meanwhile, the Bank of England (BoE) and the European Central Bank (ECB) are also set to announce their policy decisions. Markets are almost fully pricing in a rate cut from the BoE as UK inflation shows signs of cooling. In contrast, the ECB is expected to hold rates steady, though traders have begun speculating about a potential rate increase in 2026.
Reflecting these expectations, the British pound was down 0.12% at $1.33645, while the euro gained 0.06% to $1.174775.
US Economic Data in the Spotlight
A significant backlog of US economic data, delayed by a recent government shutdown, is finally set for release this week. This includes the crucial November non-farm payrolls report on Tuesday and inflation figures on Thursday. This data will offer vital clues about the Federal Reserve's future policy path.
Federal Reserve Governor Stephen Miran stated on Monday that current above-target inflation does not reflect underlying dynamics, asserting that "prices are now once again stable." This follows last week's rate cut by a divided Fed, where Chair Jerome Powell signalled a pause in further near-term reductions.
The US dollar index, which measures the greenback against a basket of six major currencies, edged 0.09% lower to 98.318. Against the Swiss franc, the dollar rose 0.16% to 0.79725.
Other Markets and Cryptocurrency Slide
In other currency movements, the Swedish crown strengthened by 0.48% against the dollar, while the Norwegian crown weakened. Both Sweden's Riksbank and Norway's Norges Bank are expected to keep interest rates unchanged this week.
In the volatile cryptocurrency market, bitcoin extended its losing streak, falling 2.56% to $86,205.11, on track for a fourth consecutive session of losses. Ether also declined sharply, dropping 4.72% to $2,936.89.
Currency strategists highlight the divergent paths of major central banks. Eugene Epstein of Moneycorp Americas noted that while the US story revolves around the timing of the next rate cut, most other developed markets are now contemplating when they might start hiking rates again, creating a complex backdrop for forex traders in the week ahead.
