06.01.202601:24:50UTC+00Dollar Steadies After Volatile Session

On Tuesday, the dollar index stabilized around 98.4 following a turbulent session the day before, characterized by geopolitical tensions and increased uncertainty regarding the Federal Reserve's policy trajectory. On Monday, the index saw an initial rise of up to 0.4% before ending approximately 0.1% lower as investors processed the impact of the U.S. military action in Venezuela. Initial fears of a wider geopolitical conflict seemed to diminish as the day progressed. Investors also considered recent ISM data, which revealed the sharpest downturn in U.S. manufacturing activity since 2024 during December. Contributing to expectations of a dovish monetary policy, Minneapolis Fed President Neel Kashkari indicated a potential risk of further increases in the unemployment rate, reinforcing the likelihood of additional interest rate cuts from the Fed this year. Nonetheless, market participants are factoring in an over 80% chance that the Federal Reserve will maintain the current rates later this month. Focus now shifts to upcoming labor market data, set to provide further insight, with the highlight being the December jobs report due this Friday.