Dollar Caps Worst Week Since June; Fed Cut Hopes & Key Data Loom

• The Bloomberg gauge of the dollar recorded its worst weekly performance since June, driven by expectations of Federal Reserve interest-rate cuts in 2026.
• Traders are keenly awaiting major US economic reports in early January, including the December jobs report and consumer inflation readings, to guide the Fed's next steps.
• The Bloomberg Dollar Spot Index fell 0.8% this week and is down 8% this year, marking its steepest annual drop since 2017.
• Risk-sensitive currencies like the Australian dollar and Norway’s krone gained against the greenback amidst thin holiday trading liquidity.
• Despite a 90% probability of the Fed holding rates next month, traders anticipate two quarter-point cuts by mid-year and later, fueled by recent unemployment and inflation data.

Why It Matters: Dollar's significant weekly drop reflects Fed rate cut expectations and upcoming US economic data's importance.