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US Dollar (USD) is mixed and still trading just under its 200-DMA. 10-year Treasury yields testing the top-end of its 3.95%-4.20% range in place since September, and US equity futures are treading water, BBH FX analysts report.

Fed is expected to cut 25bps, markets eye SEP and vote split

"The FOMC is expected to trim the target range for the Fed funds rate by 25bps to 3.50-3.75% (90% priced in). The press release is likely to stress again that inflation 'remains somewhat elevated', and 'downside risks to employment rose in recent months'."

"The Fed could announce plans to start buying short-term T-bills given recent upward pressure on funding rates. This would be a liquidity management measure, not a change in the underlying stance of monetary policy. Instead, the FOMC vote split, Summary of Economic Projections (SEP) and Fed Chair Jay Powell’s press conference will steer the hawk-dove policy tilt."

"Markets are positioned for a hawkish cut as US two-year swap rates (3.20%) are slightly above the FOMC 2027/2028 funds rate projection (3.13%). That means the bar for a dovish surprise is low."

US Dollar (USD) is likely to trade with a downward bias, but is unlikely to break below 7.0540. In the longer run, outlook for USD remains negative; the next level to watch is 7.0400, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD/CNH is unlikely to break below 7.0540

24-HOUR VIEW: "USD closed unchanged at 7.0715 two days ago. Yesterday, we indicated that 'the price action provides no fresh clues, and we continue to expect USD to trade between 7.0620 and 7.0740'. USD subsequently rose to 7.0717, dropped to 7.0600, before closing at 7.0621 (- 0.13%). The slight increase in downward momentum suggests USD is likely to trade with a downward bias today, but momentum is likely not strong enough to break below last week’s low, near 7.0540. Resistance levels are at 7.0650 and 7.0710."

1-3 WEEKS VIEW: "We turned negative on USD early last week. In our latest narrative from last Thursday (04 Dec, spot at 7.0565), we indicated that 'the outlook for USD remains negative, and the next level to watch is 7.0400'. Although USD has not been to make further headway on the downside, we will maintain the same view as long as 7.0770 (no change in ‘strong resistance’ level) remains intact."

It's FOMC day and a 25bp rate cut – which would take the target rate to 3.50-3.75% – is around 90% priced in. The big focus will be the Summary of Economic Projections (SEP), the number of dissenters against the 25bp cut, and then Chair Powell's press conference, ING's FX analyst Chris Turner notes.

Dollar might spike to 99.60 on a hawkish cut

"There's a risk of up to four Fed dissenters, versus one in October, and the Fed probably keeping just one rate cut in 2026 in the SEP. This compares to the close to two additional rate cuts priced in by the markets for 2026. There will also be a focus on growth and the unemployment rate projections, which in September stood at: GDP 1.8% (26), 1.9% (27), 1.8% (28) and unemployment at 4.4% (26), 4.3% (27). GDP is at risk of being revised higher, while projections for the unemployment rate could be nudged higher."

"In October, Powell's press conference sent the dollar sharply higher. Presumably, those risks remain today as he discusses dissent in the decision and the fact that three back-to-back rate cuts have taken the policy rate much closer to neutral. Clearly, the pricing of a second rate cut in 2026 is at risk today and comes during a week when investors are hawkishly reassessing global central bank policy."

"DXY could trade up to 99.60 today on a hawkish cut, but the release of what should be soft jobs data next week and seasonal December weakness suggest that today's dollar rally might not last."

Further US Dollar (USD) strength is not ruled out; any advance may not reach 157.20. In the longer run, USD must close above 157.20 before a move to 157.90 can be expected, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD must close above 157.20 before moving to 157.90

24-HOUR VIEW: "When USD was at 155.85 in the early Asian session yesterday, we were of the view that it 'could edge higher'. However, we noted that 'momentum does not appear to be strong enough to break clearly above 156.20'. We did not expect upward momentum to accelerate so quickly, as USD soared to a high of 156.95. While USD strength is not ruled out, conditions are deeply overbought, and USD may not reach 157.20 today. To keep the momentum going, USD must hold above 156.30, with minor support at 156.55."

1-3 WEEKS VIEW: "In our most recent narrative from last Thursday (04 Dec, spot at 155.20), we highlighted that 'for a sustained decline, USD must first close below 154.65'. While USD dropped below 154.65 a couple of times, it did not close below this level. Yesterday, USD soared above our ‘strong resistance’ level at 156.20 and then closed at 156.86. The tentative downward pressure has faded. There has been a rapid increase in upward momentum, but this time around, USD must close above 157.20 before a move to 157.90 can be expected. The likelihood of USD closing above 157.20 is expected to increase in the next few days as long as the ‘strong support’ level, now at 155.80, is not breached."

• The Indian Rupee gains further against the US Dollar as trade talks between the US and India begin.
• Investors expect the Fed to cut interest rates by 25 bps to 3.50%-3.75%.
• This week, investors will focus on India’s retail CPI data, scheduled for release on Friday.

The Indian Rupee (INR) gives back early gains and ticks up against the US Dollar (USD) during afternoon trading hours in India on Wednesday. The USD/INR pair edges higher to near 90.25, even as the US Dollar declines, with investors turning cautious ahead of the Federal Reserve’s (Fed) monetary policy announcement at 19:00 GMT.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% lower to near 99.10.

The CME FedWatch tool shows that the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December policy meeting is 87.6%. This will be the Fed's third interest rate cut in a row. Firm Fed dovish expectations are driven by weak United States (US) labour market conditions.

Lately, a significant number of Federal Open Market Committee (FOMC) members have also supported the need for further policy expansion amid downside employment risks. In late November, New York Fed Bank President John Williams stated that there is room for further interest rate cuts in the near term as the policy is still modestly restrictive, while warning that the "economic growth has slowed and the labour market has gradually cooled".

As the Fed is almost certain to bring borrowing rates down further, the major driver for the US Dollar’s outlook will be the Fed’s guidance on interest rates. Investors would like to know whether the Fed will announce a pause to the ongoing monetary-easing campaign or lean towards a data-dependent approach.

Financial market participants will also focus on the Fed’s dot plot, which shows where policymakers collectively see the Federal Funds Rate heading in the near-to-longer term.

Daily digest market movers: Indian Rupee falls back while US-India trade talks begin

• The Indian Rupee retreats against the US Dollar as two-day trade talks between the United States (US) and India begin on Wednesday. US Deputy Trade Representative Rick Switzer was scheduled to visit India on December 10-11, while India's foreign ministry described Switzer's meetings as a "familiarisation" trip, Reuters reported.
• Officials from India would look to push for reducing tariffs on exports to the US, which currently stands at 50%, one of the highest among Washington’s trading partners.
• Signs from the meeting that the US and India have made progress towards reaching a consensus would be favorable for the Indian Rupee, which has lost significant interest from overseas investors due to trade deal uncertainty.
• So far in December, Foreign Institutional Investors (FIIs) have turned out to be net sellers on all trading days, and have offloaded stake worth Rs. 14,819.29 crores. FIIs have also remained net sellers in the last five months.
• On the domestic front, investors will focus on the retail Consumer Price Index (CPI) data for November, which will be released on Friday. According to a December 4-8 Reuters poll, India’s retail inflation grew at an annualized pace of 0.7%, faster than 0.25% in October.

Technical Analysis: USD/INR stays above key 20-day EMA

USD/INR trades flat near 90.20 in the European trading session on Wednesday. The upward-sloping 20-day Exponential Moving Average (EMA) at 89.6463 underscores a steady uptrend, with the spot holding above it.

The 14-day Relative Strength Index (RSI) at 62.00 has eased from earlier overbought readings, indicating firm yet moderating momentum.

Trend strength would remain in place while price stays above the 20-day EMA, where pullbacks could find support. A renewed push in momentum toward the RSI 70.00 band could extend gains, whereas a drop toward 50.00 would signal consolidation. Buyers defending the 20-day EMA would keep the path higher intact, while a close below it could open a deeper correction toward the November 13 high at 88.97.

(The technical analysis of this story was written with the help of an AI tool.)

EUR/USD edged lower this week amid rising US rates and FOMC risk, with near-term support at 1.1585/90, while eurozone fiscal and geopolitical developments—including French budget hurdles and potential use of frozen Russian assets for Ukraine—remain in focus but are unlikely to undermine the euro’s safe-haven appeal, ING's FX analyst Chris Turner notes.

French fiscal challenges and EU plans for Russian asset use keep EUR on watch

"The EUR/USD has moved slightly lower as USD rates have increased this week. The FOMC risk is a negative one for EUR/USD. A bearish re-pricing at the short end of the US curve could trigger a drop back to the 1.1585/90 area. There is also an outside risk of 1.1555/65 in thinning year-end markets. However, EUR/USD may not stay down there long, and we would continue to favour a bounce back – potentially as high as 1.1800 – by the end of the year."

"In eurozone domestic politics, we've seen France pass an important social security budget. Yet the difficulty in getting that done bodes ill for getting a 2026 state budget passed this year and French fiscal risk will remain a weight on the euro in 2026. At the geopolitical level, there is a focus this week on EU officials using emergency powers to outmaneuver Hungary and freeze EUR210bn of Russian assets, to be used as a reparation loan for Ukraine. European leaders are desperate to make this happen, such that Ukraine is not bulldozed into a ceasefire by the US and Russians."

"On that subject, political consultants suggest that a ceasefire deal is still possible. We mention all this in the context of the euro, since some asset managers are concerned that the abuse of property rights could undermine the safe haven status of the euro. We have seen no indication of that in any flow data so far, and as long as the ECB is not drawn in to back-stopping Ukraine loans, we doubt this development will notably weigh on the euro."

• USD/CAD ticks higher to near 1.3850 despite slight weakness in the US Dollar.
• Investors await BoC-Fed monetary policy announcements.
• The BoC is expected to leave interest rates steady, while the Fed is almost certain to lower them.

The USD/CAD pair trades marginally higher around 1.3850 during the European trading session on Wednesday. The Loonie pair consolidates as investors await the monetary policy by the Bank of Canada (BoC) and the Federal Reserve (Fed), which will be announced later in the day.

The BoC is expected to keep interest rates on hold at 2.25% as recent Canadian employment prints have shown signs of strong job creation in the September-November period, following lay-offs in July and August.

Meanwhile, the Fed is almost certain to cut the Federal Funds Rate by 25 basis points (bps) to 3.50%-3.75% amid weak United States (US) labor market conditions. The major highlight of the Fed’s policy will be fresh monetary policy guidance for 2026.

According to the CME FedWatch tool, there is a 58% chance that the Fed will cut borrowing rates at least two times through October 2026.

Ahead of the Fed’s monetary policy, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 99.10.

USD/CAD daily chart

USD/CAD trades near 1.3850 during the European trading session on Wednesday. The pair has remained below the 200-day Exponential Moving Average (EMA) at 1.3912, keeping bears in control. The 200-day EMA has flattened after a prior grind higher, pointing to waning trend strength. Failure to reclaim the 200-day EMA would continue to pressure the downside.

The 14-day Relative Strength Index (RSI) at 35 (bearish) stays above oversold, demonstrating weak upside momentum.

Below the 200-day EMA, the path of least resistance remains lower, with rallies capped by that dynamic barrier. A daily close back above the average would neutralize the immediate bearish tone and open the door for a broader recovery towards the December 4 high of 1.3977. RSI would need to reclaim 50 to validate an improvement in momentum. On the downside, the August 7 low at 1.3720 will remain a key demand area.

(The technical analysis of this story was written with the help of an AI tool.)

Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $60.97 per troy ounce, up 0.30% from the $60.79 it cost on Tuesday.

Silver prices have increased by 111.03% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 68.83 on Wednesday, down from 69.29 on Tuesday.

(An automation tool was used in creating this post.)