The US Dollar Index (DXY) is clinging to minor gains during a subdued year-end session on Wednesday. However, the index has retraced most of its intraday advance, slipping from a high of 98.44 to trade near 98.25 ahead of the US opening bell.
A Challenging Year for the Greenback Currently trading approximately 2% below its November peak of 100.40, the DXY is on course for a nearly 10% annual decline. This marks the US Dollar’s weakest yearly performance in eight years, positioning it as one of the worst performers among G8 currencies in 2025.
Bearish sentiment has been driven by concerns over President Donald Trump’s unpredictable trade policies and mounting evidence of an economic slowdown, both of which have fueled short positions throughout the year. Furthermore, unprecedented political pressure on the Federal Reserve to lower borrowing costs has eroded market confidence in the central bank’s independence, raising questions about the US Dollar’s long-term standing as the global reserve currency.
Policy Divergence Weighs on Outlook Looking ahead, the Federal Reserve is only midway through its monetary easing cycle, whereas most other major central banks have already reached their terminal rates. This policy divergence acts as a significant headwind against any meaningful recovery and is expected to keep the US Dollar under pressure heading into 2026.
Intraday Focus: Jobless Claims While trading volumes remain thin on the final trading day of the year, the weekly US Jobless Claims report could provide a final catalyst for the FX market. Initial claims are projected to rise to 220K for the week of December 16, up from 214K the previous week. Given the current sentiment, risks for the USD remain skewed to the downside.
