NEW YORK, December 4, 2025 – Financial markets are increasingly pricing in a rate cut by the U.S. Federal Reserve (The Fed) at its upcoming meeting, driven by disappointing data showing a deeper-than-expected contraction in U.S. manufacturing activity. The U.S. Dollar (USD) is under pressure following the release, strengthening the case for monetary policy easing.
KEY DEVELOPMENTS
1. Manufacturing Slump Fuels Dovish Hopes
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ISM PMI Release: The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) fell to 48.2 in November, down from 48.7 in October. This marks the ninth consecutive month of contraction (a reading below 50).
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Weak Components: Key sub-indexes, including New Orders and Employment, also showed softening, suggesting weakening demand across the economy. However, the Prices Paid component indicated a rise, possibly due to renewed tariff pressures.
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Market Reaction: The weaker data reinforces the view that the Fed must ease its monetary policy cycle to support economic growth. Current market projections estimate an 87-88% probability of a 25 basis point rate cut at the December 2025 FOMC meeting.
2. US Dollar Under Pressure
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DXY Decline: The U.S. Dollar Index (DXY), which measures the Dollar against a basket of six major currencies, extended its decline following the data release, trading at its lowest level in three weeks.
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Yields Drop: U.S. Treasury yields also moved lower as investors shifted focus from inflation fears to growth concerns, increasing the appeal of fixed-income securities.
3. United States Assumes G20 Presidency
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G20 Handover: The United States officially took over the G20 Presidency from South Africa on December 1, 2025.
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Focus Areas: Under the administration of President Donald Trump, the U.S. Presidency commits to returning the G20’s focus to its core mission: fostering global economic growth and prosperity.
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Priorities: Stated priorities for the 2026 term include reducing regulatory burdens, securing affordable energy supply chains, and championing new technologies and innovation.