The USD has maintained its low momentum throughout the week as a week of limited economic data releases coincides with the Christmas holiday and global central banks begin their holidays.
At 9.50am, the US Dollar Index (DXY) remained flat at 97.945 points since it opened early Friday in Asian trading.
Despite US Gross Domestic Product (GDP) recording a strong annual growth of 4.3% in the third quarter, up from around 3.8%, the US Dollar failed to show any sustained strength.
This is because the market is paying more attention to the composition of growth and the direction of monetary policy, rather than just the headline GDP figure.
Much of the economic growth has been driven by the healthcare sector and inventory adjustments, rather than a broad-based increase in private investment or productivity. Therefore, the data is unable to change the medium-term downward trend for the US Dollar.
Futures markets are now expecting at least two more interest rate cuts by the Federal Reserve (Fed) in 2026, despite economic data showing signs of strengthening. This is due to slowing inflation and gradually diminishing labor market momentum.
Weekly data and consumer confidence indicators point to slower hiring and weaker consumer sentiment towards the end of the year, limiting real yields and keeping pressure on the USD.
In addition, statements by US President Donald Trump, suggesting that the next Fed chair should be prepared to cut interest rates even if the economy shows strong growth, have added to political concerns about the central bank's autonomy.
This uncertainty has also reinforced downward pressure on the US Dollar until 2026, especially in weeks with low market liquidity due to the Christmas holiday.
