USD Weakens as December Fed Rate Cut Expectations Strengthen to 65%

The US Dollar has softened across major pairs as market pricing for a December Federal Reserve rate cut climbs to 65%, up from 55% last week. Currency markets are positioning ahead of this week's critical US economic data releases, including Consumer Confidence, GDP revision, and PCE inflation figures. The dollar index (DXY) has retreated 0.2% to 103.80, breaking below its 20-day moving average. Upcoming data could prove pivotal for Fed policy decisions, with particular focus on Friday's Core PCE reading, expected at 2.8% year-over-year. EUR/USD has benefited from dollar weakness, advancing to 1.0545, while GBP/USD tests 1.2580 resistance. Treasury yields have also declined, with the 10-year falling to 4.28%, reflecting growing rate cut optimism. Should economic data disappoint expectations, the probability of a December cut could exceed 75%, potentially driving the dollar index below crucial 103.50 support.