Abstract:What has happened to the U.S. dollar in 2025, and what can we expect in 2026?
The U.S Dollar Index measures the dollars strength against six major currencies, mainly the Euro (EUR). Recent price action on the DXY (U.S Dollar Index) shows that this has been a weaker year for the dollar, with some small gains the last half of the year.

Studying the price action above we can quickly note that it might be hinting at a further continuation of this downtrend on the DXY into 2026. The same observation can be made on the EUR/USD chart (Euro vs U.S Dollar) where we can see a bullish year for the Euro and a hint at a continuation of this trend.

So what does this mean for us as traders? Simply put, if we see the continuation then betting against the dollar in the coming year can put you in a favourable position. Keep in mind that confirmation is key, and waiting for a confirmation on the trend (like a break of the recent lows on the DXY) should play a massive role in your decision-making.
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The US Dollar Index (DXY) remains steady near 98.00, supported by a mix of technical recovery and external currency weakness. While markets await definitive signals on the Fed's 2026 cutting cycle, technical breakdowns in major peers are driving price action.

The divergence between Federal Reserve guidance and market pricing is widening as traders position for 2026, setting the stage for significant volatility in the US Dollar. While the Fed’s latest dot plot conservatively suggests a single 25-basis-point rate cut in 2026, major financial institutions—including Goldman Sachs and Citi—are pricing in a more aggressive easing cycle of 50 to 75 basis points.

The market capitalization of the six largest US banks surged by approximately $600 billion in 2025, driven by a dual tailwind of financial deregulation and a resurgence in investment banking. This rally has widened the valuation divergence between American lenders and their European counterparts, reinforcing a theme of US financial exceptionalism that continues to influence global capital flows.

Global diplomatic tensions spiked on Wednesday as a coalition of 14 nations—including the UK, France, Germany, and Japan—issued a rare joint statement condemning Israel's approval of new settlements in the West Bank. The diplomatic rift comes at a critical juncture, threatening to derail the fragile ceasefire negotiations in Gaza.