The US Dollar Index may fall another 2%, and the euro's trend is expected to break upward?

**The US dollar has recently come under pressure, with a clear upward trend in the euro**

After several days, the downward trend of the US Dollar Index still shows no signs of easing. On December 3rd, the US Dollar Index declined 0.08% to 99.24, marking the ninth consecutive day of decline. Meanwhile, the EUR/USD also continued its rally, rising for the eighth day in a row, currently at 1.1637. The market generally believes that this wave of movement is driven by investors' increasing expectations of the Federal Reserve continuing to cut interest rates.

According to the latest data from the CME FedWatch Tool, the market assigns an 89.2% probability that the Fed will cut interest rates by 25 basis points in December. Looking ahead, there is also a possibility of two more rate cuts in 2026, further reinforcing the expectation of a weaker dollar.

**Historical patterns suggest December is a traditionally weak month for the dollar**

Based on statistical patterns over the past ten years, the US Dollar Index has not performed well in December. Data shows that in eight of the past ten years, the dollar declined in December, with a frequency of 80%. Even more noteworthy, the average decline in this month is 0.91%, making it the weakest month of the year.

Given this historical background, whether the dollar will continue its downward trend depends on two major variables. The first is the Bank of Japan's interest rate decision; the second is the upcoming appointment of the Federal Reserve Chair.

**Multiple variables drive expectations of a weaker dollar**

Recent news suggests that US leaders may appoint Chief Economic Advisor Haskett as the new Fed Chair. If this happens, analysts generally believe it will put downward pressure on the dollar. Van Luu, Head of Global Forex at Russell Investments, said that under Haskett's leadership, the Fed's policy stance might become more dovish, which would help weaken the dollar further. He further predicts that the EUR/USD could break through this year's high of about 1.19, potentially reaching a four-year high.

At the same time, the actions of the Bank of Japan should not be overlooked. Latest market data shows an 80% probability that the Bank of Japan will raise interest rates in December. Steven Barrow, G10 Strategist at Standard Bank, pointed out that rate hikes by the Bank of Japan, leadership changes at the Fed, and unfavorable tariff policies will exert multiple pressures on the dollar.

**Short-term and medium-term outlook: 2% downside potential to be explored**

Deutsche Bank macro strategist Tim Baker analyzed that the US Dollar Index may fall back to levels near the lows of Q3, which means there is about 2% downside potential from the current level. Although these changes may not fully materialize within the remaining time of this year, by early 2026, the logic of a weaker dollar will become clearer.

Considering all these factors, the euro's trend is expected to continue upward. Investors should closely monitor key events such as the Fed Chair appointment and the Bank of Japan's rate hike, as these will directly influence the subsequent performance of EUR/USD.