The US Dollar is experiencing minor upward movement, although overall losses continue as the DXY index hovers near 99. Market activity reflects a consolidating pattern ahead of the Federal Reserve’s anticipated rate cut.
Recent data indicates a consistent slowdown in the US labour market, with November’s private sector figures showing a 32k drop in non-farm payrolls and a 9k decrease in hiring. This trend suggests support for an expected 25 basis points rate cut, despite the uncertainty around future policy direction.
December Trends And Economic Indicators
Delayed September data on Personal Income, Spending, and PCE is anticipated to show spending and income have risen slightly, with Core PCE expected to dip to 2.8%. The University of Michigan’s Sentiment data is projected to improve marginally, though it remains near record lows. Negative technical drivers continue to affect the Dollar Index amidst a second consecutive weekly decline, with December’s seasonal trends generally being unfavourable for the dollar.
The FXStreet Insights Team compiles observations from distinguished experts alongside internal and external analyst insights, aiming to provide a comprehensive view of market trends.
We see the US Dollar showing continued weakness, with the DXY index struggling around the 99 level ahead of next week’s crucial Federal Reserve meeting. The market is now fully expecting a 25 basis point rate cut, so traders should be looking past the decision itself and towards the policy outlook for 2026. The real market move will come from hints about the future pace of easing.
This expectation is supported by clear signs of a slowing US economy, reminiscent of the conditions we saw prior to the easing cycle back in 2019. Recent private payroll data from November 2025 showed a net loss of jobs, while the latest Core PCE inflation reading is set to ease to 2.8%, giving the Fed ample reason to act. This environment makes buying put options on the dollar, or call options on currencies like the Euro or Yen against the dollar, an attractive strategy.
Strategies For Traders
The technical picture also looks bearish for the dollar, as two consecutive weekly declines reinforce a downward trend, with our focus remaining on a move towards the mid-97 range. December has also historically been a weaker month for the dollar, a seasonal trend that adds weight to bearish positions. For traders, this could mean establishing short positions in US Dollar index futures to capitalize on this expected decline into year-end.
Uncertainty about the Fed’s path in 2026 is causing a rise in implied volatility in the currency markets. With consumer sentiment data near record lows, any surprise in the Fed’s forward-looking statement could trigger a significant price swing. This suggests that volatility-based strategies, which can profit from a large move in either direction, may be prudent to consider around the FOMC announcement.
