Traders are pricing around 86% odds of central bank cut next Wednesday, and potentially 2-3 more cuts next year, LSEG data showed

The U.S. dollar languished not far from a five-week low against its major peers on Friday as investors braced for a U.S. central bank rate cut next week.

Markets widely expect a quarter point cut when the policy-setting Federal Open Market Committee meets on December 9-10, and a focus will be on any signals about how much additional easing lies ahead.

The dollar index was flat at 99.065 early in Asia. A small gain overnight snapped a nine-day losing streak, but the index had dropped to a five-week low of 98.765 earlier that session, and it remains on course for a 0.4% decline this week.

Traders are pricing around 86% odds of central bank cut next Wednesday, and potentially 2-3 more cuts next year, LSEG data showed.

Bank officials have been carefully watching the labour market to determine whether the economy needs further support.

Data overnight showed the number of Americans filing new applications for unemployment benefits fell to a more than three-year low last week, but may have been skewed by the Thanksgiving holiday. The data picture remains incomplete following the record-long government shutdown delayed some releases and prevented other data from ever being collected.

Crucial monthly payrolls figures would ordinarily be published later on Friday, but have been delayed, and the previous month’s numbers were never released. However, one of the bank’s preferred inflation gauges – the PCE deflator – will be published later on Friday, although the data is for September.

Economists surveyed by LSEG expect a 0.2% monthly rise in the core number.

An increase of 0.2% per month or below will encourage the FOMC to cut the Funds rate next week in our view, Commonwealth Bank of Australia currency strategist Carol Kong wrote in a client note. Our analysis suggests the risk is a soft increase in core PCE inflation of only 0.1%.

The dollar has come under additional pressure in recent days with investors also weighing the prospect of White House economic adviser Kevin Hassett taking over as central bank Chair after Jerome Powell’s term ends in May. Hassett is expected to push for more rate cuts.