Major central bank decisions from the Federal Reserve, the European Central Bank, and the Bank of England will all be announced the following week.
Whether inflation has peaked and given policymakers more room to deliver gradual interest rate increases over the coming months is the crucial question for traders and investors.
A day before the Fed's policy meeting on December 14th, the U.S. government will also release monthly consumer inflation data, which might play a significant role in determining longer-term expectations for monetary policy.
Until we get those central bank meetings and one important monthly U.S. data release, not much is happening, according to RBC currency analyst Adam Cole. "U.S. CPI is the one data release that seems to truly matter for broader dollar movement at the moment," Cole said.
In general, the dollar held steady versus a variety of important currencies. The euro last traded at $1.0507 against the dollar, unchanged, while the pound dropped by 0.3% to $1.2171.
The yen lost part of its 0.4% gain from Wednesday, dropping 0.25% to 136.90. The yen is very sensitive to changes in U.S. Treasury yields.
Since reaching a 15-year high in late October, the yield on the 10-year Treasury has decreased virtually nonstop, losing about a full percentage point. In fact, it has reversed about half of the increase that occurred between the four-month lows in August and the peak of roughly 4.34% in October.
As worries about how much a weakening economy will affect global energy demand have grown, oil prices have dropped below $80 a barrel for the first time since Russia invaded Ukraine in late February.
The price of Brent oil futures, which reached a 14-year high of $139.13 in early March, has nearly halved to approximately $78. According to the American Automobile Association, gas prices in the United States, which reached a record high of $5.016 in June, are currently at $3.329, a decrease of 0.4% from this time last year.
Energy prices have decreased, which has also lowered market-based inflation projections. The yield on an inflation-linked Treasury is subtracted from the yield on a nominal 10-year note to get the 10-year breakeven inflation spread, which is currently at just 2.27% after peaking above 3% in April.
These two factors have decreased the value of the dollar by 6.2% thus far this quarter, along with dwindling expectations that the Fed will continue rising interest rates at their current brisk clip.
According to Refinitiv statistics, this has put the dollar on track for its worst quarterly performance since the third quarter of 2010, when it declined 8.5%, but for its worst fourth-quarter performance since 2004.
According to Lee Hardman, currency strategist at MUFG, "the price action continues to show that market players are growing less concerned over upside inflation concerns and more anxious over downside risks to global economy."
The 10-year yield was recently 5 bps higher at 3.45% after dropping overnight to practically its lowest level in almost three months.
The Federal Open Market Committee, which sets policy, is expected to boost rates by half a point next week with just a 9% probability of an additional 75 basis point increase, according to the money markets. Current predictions have May's rate high at just around 5%.
The yuan, however, traded around a nearly three-month high as China announced another easing of some of its extremely onerous COVID controls.
A small portion of the 0.34% loss on Wednesday, when the Chinese government announced a relaxation of several COVID-19 policies that have severely slowed the economy, was recouped as the US dollar nudged up 0.1% to 6.9670 yuan in offshore trading.
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