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Dollar Slides as Markets Lock In December Rate Cut and Eye 2026

MarketDash Editorial Team
5 hours ago
The greenback spent most of the first week of December trailing G10 currencies as softer economic data reinforced expectations for a Federal Reserve rate cut. Meanwhile, the Australian dollar surged on hawkish RBA signals, while the euro and Swiss franc struggled to gain traction.

December started with the usual seasonal dip-buying pattern, pushing all major equity indices higher. But the real story last week played out in the currency markets, where a meaningful rotation took hold as central bank expectations shifted and global risk appetite perked up.

The U.S. dollar spent most of the week getting beaten up by its G10 peers. The culprit? A string of economic data that made a December rate cut look increasingly inevitable. Softer private employment numbers, mixed labor indicators that weren't quite alarming, and the Fed's preferred inflation gauge dropping to its lowest year-over-year reading since May all pointed in the same direction: the Federal Reserve is cutting rates this month.

Even though longer-dated Treasury yields staged a bit of a comeback toward week's end, it wasn't enough to revive meaningful demand for the dollar. As risk sentiment improved, investors rotated into higher-beta currencies with more upside potential.

Not every currency benefited equally. The Swiss franc actually underperformed, reflecting a fade in defensive positioning as yields outside Switzerland ticked higher and equity markets held steady. The euro also traded heavy, struggling to rally even as the dollar softened. Investors remained cautious about the eurozone's sluggish growth outlook and limited yield advantage compared to other markets.

The Australian dollar, by contrast, absolutely surged to the top of the leaderboard. Markets latched onto the idea that the Reserve Bank of Australia might actually need to start tightening again in 2026. Governor Michele Bullock's comments to parliament about the danger of re-accelerating inflation gave traders all the narrative they needed to pile into the Aussie.

The Canadian dollar wasn't far behind, getting a lift from another strong labor market report that strengthened expectations the Bank of Canada will keep rates on hold well into 2026. Meanwhile, sterling continued benefiting from lingering optimism following the broadly well-received Autumn Budget.

Pairs In Focus

EUR/AUD

Aussie dollar strength drove this pair to fresh lows as price action smashed through a critical support level. The focus now shifts to a lower trendline, though near-term opportunities could emerge from selling the pullbacks, especially if they get rejected at the former support level.

CHF/SGD

After a fakeout high, this pair returned to a key level and then created a short-term higher high. Although there are clear signs of a market structure break here, it's worth watching for a potential level break and a new lower low.

If that scenario plays out, there will be opportunities to short any pullbacks and capture a larger move to the downside.

The Week Ahead

Looking forward, the market's attention is firmly locked on the Fed's December decision, though at this point it feels like a done deal. The CME FedWatch tool shows the probability of a rate cut sitting at nearly 90%.

With a cut already fully priced in, the dollar's path forward isn't really about whether the Fed cuts this month. It's about how convincingly the Fed signals its easing trajectory into 2026, and whether incoming economic data can support the relatively aggressive rate-cut profile that markets are currently pricing in. That's where the real uncertainty lies, and where the next big currency moves will likely come from.

Back to News

Dollar Slides as Markets Lock In December Rate Cut and Eye 2026

MarketDash Editorial Team
5 hours ago
The greenback spent most of the first week of December trailing G10 currencies as softer economic data reinforced expectations for a Federal Reserve rate cut. Meanwhile, the Australian dollar surged on hawkish RBA signals, while the euro and Swiss franc struggled to gain traction.

December started with the usual seasonal dip-buying pattern, pushing all major equity indices higher. But the real story last week played out in the currency markets, where a meaningful rotation took hold as central bank expectations shifted and global risk appetite perked up.

The U.S. dollar spent most of the week getting beaten up by its G10 peers. The culprit? A string of economic data that made a December rate cut look increasingly inevitable. Softer private employment numbers, mixed labor indicators that weren't quite alarming, and the Fed's preferred inflation gauge dropping to its lowest year-over-year reading since May all pointed in the same direction: the Federal Reserve is cutting rates this month.

Even though longer-dated Treasury yields staged a bit of a comeback toward week's end, it wasn't enough to revive meaningful demand for the dollar. As risk sentiment improved, investors rotated into higher-beta currencies with more upside potential.

Not every currency benefited equally. The Swiss franc actually underperformed, reflecting a fade in defensive positioning as yields outside Switzerland ticked higher and equity markets held steady. The euro also traded heavy, struggling to rally even as the dollar softened. Investors remained cautious about the eurozone's sluggish growth outlook and limited yield advantage compared to other markets.

The Australian dollar, by contrast, absolutely surged to the top of the leaderboard. Markets latched onto the idea that the Reserve Bank of Australia might actually need to start tightening again in 2026. Governor Michele Bullock's comments to parliament about the danger of re-accelerating inflation gave traders all the narrative they needed to pile into the Aussie.

The Canadian dollar wasn't far behind, getting a lift from another strong labor market report that strengthened expectations the Bank of Canada will keep rates on hold well into 2026. Meanwhile, sterling continued benefiting from lingering optimism following the broadly well-received Autumn Budget.

Pairs In Focus

EUR/AUD

Aussie dollar strength drove this pair to fresh lows as price action smashed through a critical support level. The focus now shifts to a lower trendline, though near-term opportunities could emerge from selling the pullbacks, especially if they get rejected at the former support level.

CHF/SGD

After a fakeout high, this pair returned to a key level and then created a short-term higher high. Although there are clear signs of a market structure break here, it's worth watching for a potential level break and a new lower low.

If that scenario plays out, there will be opportunities to short any pullbacks and capture a larger move to the downside.

The Week Ahead

Looking forward, the market's attention is firmly locked on the Fed's December decision, though at this point it feels like a done deal. The CME FedWatch tool shows the probability of a rate cut sitting at nearly 90%.

With a cut already fully priced in, the dollar's path forward isn't really about whether the Fed cuts this month. It's about how convincingly the Fed signals its easing trajectory into 2026, and whether incoming economic data can support the relatively aggressive rate-cut profile that markets are currently pricing in. That's where the real uncertainty lies, and where the next big currency moves will likely come from.