USD Weakens to 98.50 Post-Fed Rate Cut, with Jobless Claims Data Key

The U.S. , currently trading below key moving averages. Technical indicators show bearish momentum, reflected in a weakening RSI. This creates pressure on the index, according to technical analysis

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Meanwhile, . However, . If the decline continues, major support could emerge between 96.00–97.00.

Impact and Policy Context

The Federal Reserve in October 2025, . Officials cited elevated inflation, slowing job gains, and rising downside risks to employment as key drivers, signaling a shift in risk balance and a commitment to further data-dependent adjustments as economic developments unfold.

Historically, such monetary policy moves exert their strongest influence on the dollar over extended horizons. Sustained rate changes typically take , . However, short-term currency movements remain highly uncertain; immediate reactions to rate cuts frequently contradict long-term trends due to unexplained shocks and other factors like geopolitical events. While the dollar faces cyclical weakness, this single rate adjustment is unlikely to reverse that trend in the near term, requiring prolonged policy direction for a meaningful impact.

Labor Market Data and Upcoming Catalysts

Weekly jobless claims surprised markets in November, . 29, . The unexpected dip underscores underlying labor market resilience, even amid holiday volatility. However, economists warn that this strength may not persist: December's initial claims are projected , potentially pressuring the dollar if labor market momentum weakens.

, reflecting lingering unemployment challenges. The delayed November employment report, postponed to Dec. 16 due to a government shutdown, adds uncertainty. Analysts attribute recent market stagnation to reduced immigration, AI-driven hiring freezes, and trade policy shifts, suggesting labor dynamics may stay fragile until clearer fiscal direction emerges. For investors, the contrast between November's resilience and December's projected slowdown highlights a narrow window where USD strength could reverse if claims rise sharply.

and Investment Implications

The U.S. dollar has faced significant headwinds, . This drop stems mainly from slower U.S. growth, rising fiscal deficits, and policy uncertainty, rather than interest rate gaps. The Federal Reserve's cautious stance, influenced by weak July jobs data, has fueled expectations for rate cuts, potentially pushing the dollar lower further.

Despite this decline, the dollar index remains elevated. , signaling underlying structural challenges even with recent stability. Strong foreign demand for U.S. assets continues to underpin the currency's resilience in the near term.

This environment is prompting a shift among investors seeking growth. Fearing prolonged dollar weakness, many are reallocating capital into foreign equities and commodities. Historical patterns show that periods of a weaker dollar often boost returns for non-U.S. stocks. Investors are advised to consider overweighting international equities and local bonds to diversify away from the anticipated drag on U.S. assets, though positioning in core U.S. sectors like AI remains tactically important.