The U.S. dollar was on the back foot all year and set for its biggest yearly fall since 2017, possibly with more to come, as investors wagered the Federal Reserve would have room to cut rates further next year even as most of its peers look finished with easing.
Tuesday's solid U.S. GDP reading failed to move the dial on the rate outlook, leaving investors pricing in roughly two more Fed cuts in 2026.
"We expect the FOMC to compromise on two more 25 bp cuts to 3-3.25% but see the risks as tilted lower," said Goldman Sachs Chief U.S. Economist David Mericle, citing slowing inflation as a reason for the forecast.
The euro and pound each nudged up to fresh three-month highs on Wednesday, though were last broadly steady on the day at $1.180 and $1.3522, respectively. ,
Against a basket of currencies, the dollar index fell to a 2-1/2-month low of 97.767. It was on track to lose 9.8% for the year, which would mark its steepest annual drop since 2017. Any further weakness in the last week of the year would take its fall to its greatest since 2003.
The dollar has had a tumultuous year, whipsawed by President Donald Trump's chaotic tariffs that sparked a crisis of confidence in U.S. assets earlier this year, while his growing influence over the Fed has also raised concerns about its independence.
In contrast, the euro is up just over 14% for the year thus far, putting it on track for its best performance since 2003.
Gold prices soared above $4,400 to reach a new all-time high, Silver prices reaching over $70. The metal is up 130% since the start of the year.
For 2025, the NASDAQ Composite Index has again outgained the other major indices. Up 50% since Spring, it is holding on to a gain of just over 20% for the year.
While that is the best of the U.S. market averages, it’s nowhere near the gains of many international equity markets. Indices for Brazil, Germany and Euro stocks are all up more than 30% for the year. Indices for emerging markets, the United Kingdom and China large caps are up more than 25%. Trump economy raising all boats.
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