The U.S. dollar weakened on Wednesday as traders analyzed mixed economic data and stayed cautious before the Thanksgiving holiday. Thin trading volumes and concerns about President-elect Donald Trump’s tariff plans also contributed to the dollar’s decline.
Economic reports showed that U.S. GDP grew at an annual rate of 2.8% in the third quarter, matching earlier estimates. While this reflected steady economic growth, it did little to increase confidence in another Federal Reserve rate cut in December. Despite this, market expectations for a 25 basis point cut edged up to 67%.
Consumer spending data suggested that inflation progress had stalled. The Commerce Department reported a 0.2% increase in the PCE price index for October, consistent with September. Year over year, inflation rose to 2.3% from 2.1%. Meanwhile, durable goods orders grew by just 0.2%, falling short of forecasts, though jobless claims declined slightly to 213,000, indicating continued labor market strength.
The dollar saw broad losses across major currencies. Against the yen, it fell to its lowest in five weeks at 150.91, a drop of 1.43%. The euro strengthened to $1.0564, its highest in a week, while the dollar index dropped to 106.06, marking its lowest level since mid-November. Analysts linked the dollar’s decline to profit taking before the holiday and month end rebalancing after a recent rally.
Concerns over Trump’s tariff plans targeting Canada, Mexico, and China added to market jitters. Analysts noted that inflation risks from tariffs and potential tax cuts might limit Trump’s ability to pursue more aggressive measures. The Japanese yen benefited from its safe haven status and Japan’s strong economic ties with the U.S.
The Canadian dollar improved slightly, with the USD/CAD pair trading at 1.4027 after hitting a 4.5-year high earlier in the week. The British pound rose to $1.267, and the Australian and New Zealand dollars also gained ground.
In cryptocurrency markets, bitcoin rose by 5.19% to $96,414 as it steadied after nearing the $100,000 mark last week.
Geopolitical tensions in the Middle East and Ukraine continued to provide some support for the dollar as a safe haven. However, with uncertainty around U.S. economic policies and holiday-thinned trading, the greenback’s outlook remains uncertain heading into the weekend.
