The U.S. dollar steadied Thursday, but remains weak after recent lackluster economic data largely cemented the case for a rate cut from the Federal Reserve next week.

The Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 98.805, near a five-week low and almost 9% lower so far this year.

Fed meeting looms large
Weak U.S. economic data has bolstered expectations for a Fed rate cut next week, weighing heavily on the U.S. currency.

"After yesterday's 32k drop in ADP payrolls, a Fed cut next week looks even closer to a certainty," said analysts at ING, in a note. The OIS curve is pricing in 25bp, meaning the Fed would face a potentially sharp adverse reaction in risk assets should it decide to hold."

At the same time, the bank added, there is only another 15bp priced in by March, meaning that expectations are firmly on a hawkish cut in December.

"Our view remains that data will justify two more cuts early next year, which underpins our view that the dollar won't make a comeback even in the seasonally favorable first quarter."

The dollar has also been pressured by U.S. President Donald Trump stating this week he will unveil his pick to succeed Jerome Powell as head of the Federal Reserve early next year, extending a months-long selection process despite previously claiming he had already decided on a candidate.

A move to appoint White House economic adviser Kevin Hassett could pressure the dollar, analysts have said, with bond investors expressing concerns to the U.S. Treasury that Hassett could aggressively cut rates to align with Trump's preferences, the Financial Times reported.

Source: Investing.com