Fed's Crypto Divide Weakens Dollar as Policy Uncertainty Grows

The U.S. dollar slid to a multi-month low on Dec. 1, as traders priced in a sharp pivot by the Federal Reserve toward rate cuts, driven by shifting economic dynamics and geopolitical signals. [Prediction markets, including Polymarket and Kalshi](https://cointelegraph.com/news/prediction-markets-bet-on-hassett-fed?utm_campaign=rss_partner_inbound&utm_medium=rss&utm_source=rss_feed), now assign a 66%-74% probability to Trump ally Kevin Hassett becoming the next Fed chair, with analysts noting his crypto-friendly stance and potential to recalibrate monetary policy. This shift has intensified speculation that the Fed will adopt a more dovish stance, countering months of hawkish rhetoric.

The dollar's decline accelerated after the White House extended the suspension of tariffs on Chinese imports until November 2026, [a move that bolstered the yuan](https://www.fxstreet.com/news/cny-hits-best-level-since-october-2024-on-tariff-suspension-extension-dbs-202512011240) to its highest level since October 2024. Meanwhile, the OECD [warned that Trump's expansive tariff regime](https://www.investing.com/news/economy-news/tariffs-ai-boom-could-test-global-growths-resilience-oecd-says-4385401)-having generated $195 billion in fiscal 2025 duties-risks stoking inflationary pressures in China and emerging markets, complicating the Fed's inflation-fighting calculus. These developments underscore a broader recalibration of global trade tensions, with U.S.-China relations expected to ease in 2026 through planned summits between Trump and Xi Jinping.

The Fed's potential pivot is also being tested by shifting consumer behavior. Black Friday data revealed [a 3% year-over-year rise in online sales](https://www.forbes.com/sites/joanverdon/2025/11/29/black-friday-data-shows-online-sales-strong-store-results-mixed/), driven by AI-driven promotions and price-sensitive shoppers. However, [in-store traffic dipped 3.6%](https://www.cbsnews.com/news/u-s-consumers-spent-a-record-11-8-billion-online-during-black-friday-sales/), with RetailNext noting consumers are "shopping with surgical precision" amid economic uncertainty. While these trends suggest resilient spending, rising average selling prices-up 7% year-over-year-highlight inflation's lingering grip, a key constraint for rate cuts.

Internally, the Fed faces a rift between reform advocates and traditionalists. [Governor Michael Barr](https://cointelegraph.com/news/prediction-markets-bet-on-hassett-fed?utm_campaign=rss_partner_inbound&utm_medium=rss&utm_source=rss_feed), a critic of Trump's economic team, has warned against diluting regulatory oversight, arguing that reduced enforcement tools could repeat pre-2008 crisis mistakes. This tension underscores the complexity of Hassett's potential leadership, as markets weigh whether a crypto-aligned Fed chair would prioritize experimentation or stability.

Looking ahead, [the OECD forecasts](https://www.investing.com/news/economy-news/tariffs-ai-boom-could-test-global-growths-resilience-oecd-says-4385401) most major central banks will lower borrowing costs in 2026 as inflation moderates, with the Fed expected to follow suit by year-end. For now, the dollar remains under pressure, with investors closely watching Trump's policy agenda and the Fed's response to a rapidly evolving economic landscape.