US Dollar Heads for Biggest Drop Since 2003!
The US dollar was on track for its biggest annual decline in more than two decades on Wednesday (December 23rd), with markets predicting the Federal Reserve will cut interest rates further next year even as other central banks prepare to raise rates. With expectations of two Fed rate cuts in 2026, the dollar remained weak, trading at 97.767 against a basket of major currencies, down nearly 10% for the year.
Although strong US GDP data indicated solid economic growth, it did not change the market's view on the Fed's monetary policy. Goldman Sachs expects two more rate cuts in 2026, driven by slowing inflation. Meanwhile, the euro strengthened to $1.1806, up more than 14% so far this year, thanks to the European Central Bank's move to hold interest rates and raise its inflation forecast.
While the US dollar was under pressure, currencies of Antipodean countries such as Australia and New Zealand strengthened. The Australian dollar has risen 8.4% this year, reaching a three-month peak of $0.6710, while the New Zealand dollar has strengthened 4.5%. This rise was fueled by expectations that the Bank of England and other central banks in the region may raise interest rates next year.
Sterling also strengthened, reaching $1.3531, after rising more than 8% year-to-date. Markets expect the Bank of England to cut interest rates in the first half of 2026, further boosting the currency.
Meanwhile, market attention has shifted to the Japanese yen, which recently strengthened following strong statements from the Japanese Finance Minister, who expressed the country's readiness to intervene in the market to stem the yen's decline. The market is anticipating possible Japanese government intervention to buy yen, given the thinner trading conditions ahead of the year-end.
With all these tensions, investors and traders are closely monitoring the movements of major currencies, which could be influenced by global monetary policy and government intervention, making the market even more volatile as the year-end approaches. (asd)
Source: Newsmaker.id
