The euro stayed supported as investors expect the ECB to keep interest rates unchanged, with President Christine Lagarde signaling possible upward revisions to growth forecasts. Political concerns in France also eased after approval of the 2026 social-security budget. Still, a modest rebound in the dollar capped further gains in the euro.

The Japanese yen has been better bid of late as investors look ahead to the Bank of Japan’s policy meeting, where a 25-basis-point rate hike to 0.75% is widely expected. Markets are focused on Governor Kazuo Ueda’s comments for signals on next year’s outlook, with some analysts forecasting rates could reach 1% by mid-year, supported by strong economic data and persistent inflation. Government officials also appear supportive of tighter policy, citing concerns over yen weakness fueling import costs, while business sentiment among large manufacturers climbed to a four-year high in the fourth quarter.

The Australian dollar has cooled off following the latest surge as investors weigh mixed labor market data. An unexpected drop in jobs in November suggested the job market is slowly cooling, prompting traders to push back expectations for interest rate hikes to late 2026, even as the Reserve Bank of Australia maintains that conditions remain tight. Attention now turns to upcoming PMI data, while the US dollar also softened after the Federal Reserve delivered a rate cut and struck a less hawkish tone than expected.