The US Dollar (USD) is trading mixed to slightly softer overall against the major currencies. Month-end flows are weighing on the USD, market reports indicate, while broader USD sentiment has softened ahead of the run of US data over the next couple of days and amid a clear strengthening in Fed rate cut expectations for next month, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD slips on month-end flows and rising rate-cut bets

"Swaps are all but fully pricing in a 1/4 point cut at the Dec FOMC now, a stark change in market thinking from last week when swaps indicated only 40% chance of a cut. WSJ Fedwatcher Timiraos says on X 'allies have laid the groundwork for Fed Chair Powell to push thru a cut if he wants one—then signal more cuts aren’t likely under current conditions'. Asia FX is leading gains on the USD. The KRW is the top performer intraday but the JPY is up 0.5% following more jaw-boning from the government."

"Japan Minister Kiuchi said that the government is watching currency movements with a 'high sense of urgency' - a clear warning to markets that officials are concerned about JPY weakness. High beta/ commodity FX is marginally lower as risk appetite remains somewhat soft. NVDA shares are lower in grey market trade. European stocks are very narrowly mixed—flat in essence—while US futures are softer."

"The DXY retains a soft technical undertone. Net losses for the index so far today reinforce the ceiling in the low 100 area, where the DXY topped out earlier in Nov and in Aug. Short -term support is 99.75/80. Key support is 99.0. Recall that DXY seasonality is typically negative in December."