The Federal Reserve's interest rate cut wave is coming! The euro against the dollar continues to strengthen, and the dollar may fall another 2% in December.

The US dollar has fallen for nine consecutive days, and the euro shows strong momentum

Latest market data indicates that the euro against the US dollar remains strong. As of December 3rd, the EUR/USD has risen for the eighth consecutive day, trading at 1.1637, while the US dollar index closed at 99.24, marking nine consecutive days of decline with a drop of 0.08%.

This weakness in the US dollar is driven by clear factors. According to the latest data from CME FedWatch Tool, the market currently prices in an 89.2% chance of a 25 basis point rate cut by the Federal Reserve in December, with expectations of two more rate cuts by 2026. The market’s anticipation of further easing by the Fed continues to intensify, which is the core factor suppressing the dollar.

December’s curse reappears? Historical data reveals seasonal weakness of the dollar

Historically, the US dollar tends to perform poorly in December. Data from the past 10 years shows that in December, the dollar index has declined in 80% of the years, with an average fall of 0.91%, making it one of the weakest months of the year.

This seasonal pattern creates conditions for further pressure on the dollar. If historical averages continue, the dollar index could face about a 2% decline before the end of the month.

Three key variables will determine the dollar’s year-end trend

Whether the dollar will continue its decline depends on three critical variables: the Bank of Japan’s policy decisions, personnel changes at the Federal Reserve Chair, and the development of trade policies.

According to the latest data, the market now prices an 80% chance of the Bank of Japan raising interest rates in December. Meanwhile, US President Trump has hinted at possibly appointing Chief Economic Advisor Haskett as the Federal Reserve Chair.

Deutsche Bank macro strategist Tim Baker pointed out that the dollar is expected to retreat to the lows of the third quarter, which means there is about a 2% downside potential for the dollar index.

Expert outlook: Euro continues to rise and may hit new highs

Several industry analysts are optimistic about the euro’s prospects. Van Luu, Global FX Head at Russell Investments, stated that under Haskett’s leadership of the Fed, monetary policy could shift toward a more dovish stance, which would help weaken the dollar further. He expects the euro to break through this year’s high of around 1.19, reaching a four-year high.

Standard Bank G10 Strategist Steven Barrow pointed out that the combination of the Bank of Japan rate hikes, leadership changes at the Fed, and adverse trade policies will form a triple bearish signal for the dollar. He believes that even if these factors do not fully materialize within the remaining cycle of this year, they will gradually unfold in early 2026.