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Cryptopolitan 2025-12-26 17:33:46

Dollar slides toward worst weekly loss since June as traders bet on rate cuts

The dollar is having a rough end to 2025, and traders aren’t hiding it. According to Bloomberg, the DXY Index dropped 0.8% this week, putting it on pace for the worst weekly loss since June. The dollar is also about to wrap up the year with an 8% decline, its biggest drop since 2017, and it’s sitting at its lowest level since September. With the UK markets shut on Friday and trading activity muted by the holidays, investors are now focused on a batch of U.S. economic data coming in January. The December jobs report and inflation readings are the ones everyone’s waiting for. The Fed just cut borrowing costs for the third straight time this year last month. What happens next depends entirely on whether that data comes in hot or cold. Right now, markets are leaning toward more cuts. Currency traders bet against the dollar as liquidity dries up The dollar’s slide this week was helped by rising appetite for risk-sensitive currencies like the Australian dollar and Norwegian krone, which both outperformed. Over in the bond market, the dollar’s pain has been Treasuries’ gain. 10-year yields dropped about three basis points to 4.12%, staying in a tight range but pointing to steady buying. Traders have nearly priced in a 90% chance that the Fed won’t touch rates at the next meeting. But markets still expect at least two more quarter-point cuts by year-end, one by mid-year, and another before 2026 kicks in. While the dollar floundered, stocks stayed in party mode. The S&P 500 hit a new all-time high on Friday. The Dow and Nasdaq were also hovering around weekly gains of more than 1%. It’s the fourth winning week out of the last five for the S&P, even though trading volumes were light coming off the Christmas holiday. Wednesday’s session was already a record-breaker, with the S&P notching new intraday and closing highs. U.S. markets were closed on Thursday, but traders returned Friday still riding the momentum. Investors are deep into what’s known as the Santa Claus rally, that quiet year-end stretch that historically lifts stocks. Since 1950, the S&P 500 has averaged a 1.3% gain during this seven-day window, based on Stock Trader’s Almanac data. Tom Hainlin, national investment strategist at U.S. Bank Asset Management, said, “People are taking profits here and there, or buying on lows, but there’s not a lot of information. You’re not getting corporate profit results. You’re not getting a lot of economic data, so it’s probably just more technicals and positioning heading into here.” Tom also pointed to a change in what’s driving the market, which is tech stocks weren’t behind the latest gains, instead, it was financials and industrials. “That just gives more confidence heading into 2026 that it’s not just tech here and everybody behind them,” Tom said. “It’s the market benefiting from the tax bill that was signed in July, the rate cuts that came in the fourth quarter of this year. Heading into 2026, those are some tailwinds.” Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free .

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