US Dollar Index rebounds to near 107.00 as US Retail Sales data loom

The US Dollar trades with mild gains to near 106.90 in Tuesday’s early European session.
The Fed is expected to lower interest rates by 25 bps on Wednesday at the end of its two-day meeting.
The US Retail Sales data for November will be released later on Tuesday.

Lallalit Srijandorn FXStreet

The US Dollar Index (DXY) posts modest gains to around 106.90 against major currencies during the early European session on Tuesday. Traders will keep an eye on the US November Retail Sales, which are due later on Tuesday. The attention will shift to the Federal Reserve (Fed), Bank of Japan (BoJ), and the Bank of England (BoE) interest rate decision this week.

The US Fed is likely to cut interest rates for the third time at its December meeting on Wednesday, bringing its overnight borrowing rate down by a quarter percentage point to a range of between 4.25% and 4.50% from its current range of between 4.50% and 4.75%. The markets are now pricing in a nearly 95.4% chance of a 25 basis points (bps) cut at the Fed's December meeting, compared with about a 78% chance a week ago, according to the CME FedWatch tool.

Traders will closely monitor Fed Chair Jerome Powell's press conference and Summary of Economic Projections (dot-plot) after the meeting. Any signs of hawkish cuts by the US central bank could provide some support to the US dollar against its rivals. "The U.S. dollar has been at the mercy of headlines not only just surrounding what the Fed is going to do but whether it's going to be deemed a hawkish cut," noted Juan Perez, director of trading at Monex USA in Washington, D.C.

S&P Global revealed in its preliminary report on Monday that the US Composite PMI, which takes both the services and the manufacturing business activity into account, came in at 56.6 in December's flash estimate from 54.9. This figure registered the highest level in 33 months.

Additionally, the Services PMI improved to 58.5 in December from 56.1 in November, above the market consensus of 55.7. On a negative note, the Manufacturing PMI declined to 48.3 in December versus 49.7 prior, weaker than the 49.4 expected. Traders will take more cues from the US Retail Sales data later in the day. If the stronger sales figures showed weaker outcomes, this could weigh on the US Dollar.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from the Bank for International Settlements. Following the Second World War, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold until the Bretton Woods Agreement in 1971, when the Gold Standard went away.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

GBP/USD declines as market caution lifts US Dollar

GBP/USD extends its gains for the second successive day, trading around 1.3200 during the Asian hours on Wednesday. The currency pair depreciated as the US Dollar gained momentum, driven by a combination of robust domestic economic data and a complex, mixed geopolitical landscape.

EUR/USD weakens below 1.1400 as Fed hike bets lift US Dollar

The EUR/USD pair trades on a negative note near 1.1380 during the early Asian trading hours on Wednesday. The major pair extends the decline as traders continue to assess the developments surrounding the US-Iran peace deal.

Gold nurses losses near $4,100 as Fed hike bets support USD

Gold recovers slightly from a fresh two-week low, near $4,070 touched during the Asian session on Wednesday, though it lacks follow-through. The US Dollar stands firm near its highest level since May 2025 amid firming expectations of a Fed rate hike, which, in turn, is seen undermining the non-yielding bullion. Furthermore, mixed US-Iran signals further favor the USD bulls.

Global strategy 3Q 2026

With the signing of a framework agreement and subsequent negotiations between the U.S. and Iran in June, the outlook for the third quarter is favorable. Oil prices have already fallen sharply, and futures are pricing in a further decline over the course of the year. This will ease the burden on consumers and reduce uncertainty among businesses, with positive effects on the economy.

"Rearranging the deckchairs on the Titanic": UK's fiscal crisis outlasts another Prime Minister

Keir Starmer's resignation as the UK Prime Minister comes ten years after the Brexit referendum vote, a coincidence that financial markets have been quick to note. The British Pound trades around 1.3220 against the US Dollar on Thursday.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.