The US dollar is teetering. Markets are watching two things: jobs data and Fed minutes. Both could send the greenback in wildly different directions.
The dollar index has been under pressure for weeks. Blame it on uncertainty over employment figures and what the Fed will do next. Rate cut expectations have climbed, with markets now pricing in a 69% chance of another December cut, up from 62% just days ago. That shift came after labor market reports showed cracks forming.
The dollar is buckling under Fed uncertainty and labor market weakness, with December rate cut odds jumping to 69%.
And those cracks are getting wider. US firms planned over 153,000 job cuts in October 2025, the highest since 2003. Private payrolls dropped by 32,000 in September, the worst decline since 2023. Jobless claims are trending upward. Nearly 1.1 million employees have been laid off since January, a 65% jump from last year. Consumer sentiment hit a five-month low. The picture isn't pretty.
The Fed already delivered a 0.25% rate cut at its October 29 meeting, reinforcing a dovish outlook. But here's the twist: recent Fed communication has been more hawkish, largely because weak jobs data hadn't materialized yet. Now it has. The upcoming Fed minutes could reveal internal debates over how fast and how deep to cut rates. Markets will scrutinize every word for clues.
Then there's the government shutdown. It's paused most federal economic reporting, creating a data vacuum that's pushed traders away from the dollar. When the shutdown ends, delayed jobs figures could reveal even deeper deterioration. Or maybe not. That uncertainty is the problem.
EUR/USD has benefited from dollar weakness, with traders piling into long positions at 1.15. Forecasts target 1.20 to 1.26 by end-Q3 2026 if US data stays soft and the Fed stays dovish. But any hawkish surprise or strong jobs data could trigger a sharp reversal. Central banks like the Fed use monetary policy tools similar to those employed by institutions such as the Bank of Ghana to manage currency stability during periods of economic volatility.
The dollar is caught between bad labor market numbers and whatever the Fed minutes reveal about policy direction. One could support further easing, the other might push back. Understanding how interest rate decisions influence currency valuations is critical for traders navigating this volatile environment. Traders should focus on proper risk management to protect their capital during this period of heightened uncertainty. Markets are waiting to see which one wins. The volatility isn't going anywhere.
