Will the US dollar continue to decline? Experts are optimistic about a strong euro by year-end

**Historical patterns signal risk warnings**

According to data from the past ten years, the US dollar's performance in December has been concerning. Data shows that in the past decade, the dollar index has declined in December in 8 years, indicating an 80% probability of the dollar falling during this month. On average, the dollar index drops about 0.91% in December, making it the weakest month of the year. Recent trends seem to confirm this pattern — on December 3rd, the dollar index was at 99.24, down 0.08% month-over-month, marking nine consecutive trading days of decline. Meanwhile, the euro against the dollar (EUR/USD) has risen in the opposite direction, climbing for the eighth straight day to 1.1637.

**Multiple factors jointly pressure the dollar**

The dollar's weakness is driven by multiple market forces. First, there is a shift in monetary policy expectations. According to the latest data from the CME FedWatch Tool, the market currently prices in an 89.2% chance of the Federal Reserve cutting interest rates by 25 basis points in December, and this easing cycle is not over — the market also anticipates two more rate cuts by 2026. This continued dovish outlook directly weakens the attractiveness of the dollar.

Second, the Bank of Japan's moves cannot be ignored. Recent market data shows that investor expectations for the Bank of Japan to raise interest rates in December have risen to 80%, which would further widen the Japan-US interest rate differential and exert pressure on the dollar. Additionally, changes in US policy are also noteworthy. US President Trump recently hinted at possibly appointing his Chief Economic Advisor, Hasset, as Federal Reserve Chair. This personnel change could reshape the Fed's policy stance.

**Expert consensus points to euro appreciation**

Regarding the dollar's outlook, several international investment firms' analysts hold a relatively pessimistic view. Van Luu, head of global FX at Russell Investments, pointed out that if Hasset officially leads the Fed, his dovish policy stance would push the dollar further weaker. He predicts that the EUR/USD could break through this year's high of about 1.19, reaching a four-year high.

Standard Bank's G10 strategist Steven Barrow paints a more comprehensive picture — the Bank of Japan raising rates, the Fed shifting policy, and tariff decisions unfavorable to the dollar — these three factors will converge to impact the dollar. He believes that even if these factors do not all materialize within the year, they will certainly have a combined effect in early 2026.

Deutsche Bank macro strategist Tim Baker provides specific numerical targets. He believes the dollar index could fall back to the lows seen in the third quarter, implying about 2% downside. In other words, the probability of the dollar rising again is relatively low, and a decline has become the mainstream market expectation.