The U.S. dollar slipped slightly on Monday as the new trading week kicked off, with investors bracing for a pivotal Federal Reserve meeting that is widely expected to bring easier monetary policy.

By 04:15 ET (09:15 GMT), the Dollar Index — which measures the greenback against six major currencies — edged down 0.1% to 98.940, keeping it close to its lowest level in more than a month.

Fed anticipation keeps the dollar on the back foot

Most traders see a rate cut as the likely outcome when the Fed wraps up its two-day gathering on Wednesday. The case for easing strengthened after Friday’s delayed core PCE inflation reading came in softer than anticipated. Futures markets tracked by CME’s FedWatch tool now imply an 88% probability of a cut.

With little U.S. data scheduled for Monday, attention is shifting to Tuesday’s JOLTS job openings report — which may carry extra weight given that the monthly nonfarm payrolls release will arrive only after the Fed has already delivered its decision.

Analysts at ING wrote: “The Fed could be a positive event risk for the dollar in that it seems hard for the Fed to validate the 90bp of easing priced into Fed Funds futures by early 2027.”

They continued: “However, the potential formal nomination of Kevin Hassett as Fed Chair over the coming months and the seasonal factors keeping the dollar weak into year-end should limit the dollar’s upside.”

Euro climbs as ECB signals shift and German output beats forecasts

EUR/USD rose 0.1% to 1.1654 after Germany posted a surprisingly strong industrial production increase of 1.8% in October, far above the forecast 0.4%.

The euro also drew support from comments by ECB policymaker Isabel Schnabel, who told Bloomberg News that the central bank’s next step could be a rate hike — challenging expectations from those still looking for another cut.

As ING noted: “These remarks probably need to be seen in the context of her hawkish background and perhaps as a foil to those at the ECB still favoring one last rate cut.”

The firm added that Schnabel has hinted the ECB could upgrade its growth projections in its next forecast round.

The British pound backed off slightly, with GBP/USD slipping 0.1% to 1.3325 as traders adjusted positions ahead of next week’s Bank of England rate meeting.

Yen softens after Japan’s GDP revised lower

USD/JPY edged up 0.1% to 155.44 after new figures confirmed that Japan’s economy shrank more sharply in the third quarter than first estimated, pressured by weak investment and sluggish exports.

Even so, the revision did little to change expectations that the Bank of Japan is still likely to raise rates next week, with market focus turning to upcoming labor and inflation indicators.

China’s trade surplus expands; Australian dollar pulls back

USD/CNY ticked higher to 7.0714 despite data showing that China’s trade surplus widened in November, supported by a 5.9% surge in exports year over year, while imports grew only modestly.

AUD/USD slipped 0.1% to 0.6636, easing after last week’s strong performance driven by signs of improving domestic economic momentum.

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