USD Index Falls as Markets Price in 95% Chance of Fed Rate Cut

The US Dollar Index dropped 0.8% to 105.20 during the week ending December 5, with USD weakness accelerating across major pairs as markets priced in a 95% probability of a 25 basis point rate cut at the December 10 FOMC meeting. EUR/USD gained 120 pips to 1.0580, while GBP/USD rose 0.9% to 1.2740, and USD/JPY retreated to 149.50. The dollar's decline reflects growing consensus that the Fed will ease monetary policy amid cooling inflation data and moderating labor market conditions. Technical indicators show the DXY breaking below its 50-day moving average at 105.80, opening the path toward 104.50 support. Traders are particularly focused on Fed Chair Powell's forward guidance, which could signal the pace of future rate cuts in 2024. A dovish tone could accelerate USD selling pressure, potentially pushing EUR/USD toward 1.0650 resistance.