USD: Good dollar demand to emerge should it trade sub-106 – ING
Source Fxstreet
The Dollar Index (DXY) is slightly softer after yesterday's release of the ISM Services index disappointed consensus and made an 18 December Fed rate cut more likely, ING’s FX analyst Chris Turner
Donald Trump to pump more air into the USD in 2025
“A column in the Financial Times was titled: 'A turning point for the dollar is coming' which sounds alarming for dollar bulls such as ourselves. But the majority of the article focused on why the dollar would strengthen first and then only soften in the medium term after the Fed had to slow tariff-induced inflation with rate hikes and then presumably cut rates into a recession too. That sounds like a bear story for the dollar in late 2026 at the earliest and possibly 2027.”
“Our view is that 2025 will be a year in which Donald Trump pumps more air into the dollar bubble. Indeed, some customers ask whether there will be some kind of 1985 Plaza-style accord to weaken the dollar. We see a low likelihood of that, but perhaps only in 2026 or 2027. History books recall that the Plaza Accord only came in four years after Ronald Reagan's expansionary policies.”
“Back to the short term and the US data calendar is light today. Weekly initial jobless claims have been staying very low recently, but tomorrow's NFP jobs data will have a much bigger say in where the dollar goes next. Events in Europe are keeping the DXY trade-weighted dollar relatively bid despite the drop in short-dated US rates. Again we would expect good dollar demand to emerge should it trade sub-106.”
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Bitcoin briefly loses 2025 gains as crypto plunges over the weekend.Bitcoin experienced a sharp decline this weekend, briefly erasing its 2025 gains and dipping below its year-opening value of $93,507. The cryptocurrency fell to a low of $93,029 on Sunday, representing a 25% drop from its all-time high in October. Although it has rebounded slightly to around $94,209, the pressures on the market remain significant.
The downturn occurred despite the reopening of the U.S. government on Thursday, which many had hoped would provide essential support for crypto markets. This year initially appeared promising for cryptocurrencies, particularly after the inauguration of President Donald Trump, who has established the most pro-crypto administration thus far. However, ongoing political tensions—including Trump's tariff strategies and the recent government shutdown, lasting a historic 43 days—have contributed to several rapid price pullbacks for Bitcoin throughout the year.
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Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
Bitcoin experienced a sharp decline this weekend, briefly erasing its 2025 gains and dipping below its year-opening value of $93,507. The cryptocurrency fell to a low of $93,029 on Sunday, representing a 25% drop from its all-time high in October. Although it has rebounded slightly to around $94,209, the pressures on the market remain significant.
The downturn occurred despite the reopening of the U.S. government on Thursday, which many had hoped would provide essential support for crypto markets. This year initially appeared promising for cryptocurrencies, particularly after the inauguration of President Donald Trump, who has established the most pro-crypto administration thus far. However, ongoing political tensions—including Trump's tariff strategies and the recent government shutdown, lasting a historic 43 days—have contributed to several rapid price pullbacks for Bitcoin throughout the year.
Market dynamics are also being influenced by Bitcoin whales—investors holding large amounts of Bitcoin—who have been offloading portions of their assets, consequently stalling price rallies even as positive regulatory developments emerge. Despite these sell-offs, analysts from Glassnode argue that this behavior aligns with typical patterns seen among long-term investors during the concluding stages of bull markets, suggesting it is not indicative of a mass exodus.
Notably, Bitcoin is not alone in its struggles, as Ethereum and Solana have also recorded declines of 7.95% and 28.3%, respectively, since the start of the year, while numerous altcoins have faced even steeper losses.
Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
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