Traders are eyeing the minutes, due to be released at 19:00 GMT, after the Fed cut its benchmark rate 25 basis points earlier in the month but cautioned rates could remain on hold in the near-term. Thin holiday volume could help fuel an exaggerated response to the minutes.
The main issue for traders going into 2026 is the split between policymakers about how aggressive the central bank will be. Dollar traders have priced in two more cuts in 2026, putting pressure on the greenback since the interest rate cut on December 10.
Sharp Reversal Follows December Rate Cut
On that date, the dollar index fell sharply from an intraday high at 99.256 and decisively on the bearish side of the 50-day moving average before reaching a near-term low at 97.749 on December 24.
Greenback Suffers Worst Annual Decline in Eight Years
The dollar has been weak nearly all year, falling over 10% at one point before stabilizing in the summer. The annual loss represented the steepest decline in eight years. Fundamentally, Fed rate cut bets, shrinking interest-rate differentials and worries about the U.S. fiscal deficit and political uncertainty, drove the currency lower.
Wall Street Strategists See More Pain Ahead in 2026
Looking ahead, the outlook for 2026 is bearish with strategists at MUFG forecasting a 5% decline for the year. Their main catalysts for the selling pressure are the U.S. economy and dovish monetary policy.
Charts Signal Critical Decision Point for Dollar’s Next Move
The daily chart is aligned with that outlook despite the recent rally from late October to late November and the current consolidation.