Following a very poor pre-Christmas week, the US Dollar then did even worse in the run-up to year-end. After a very brief opening rally on Tuesday, the index fell to a 3-week low of 92.73. On Wednesday in Europe it traded down to 92.51; the lowest level since December 1st and on Thursday it hit 92.24; the weakest since September 25th. Friday was weaker still and its index against a basket of major currencies fell to a low of just 91.77 before rallying slightly to end the year at 91.91. For the calendar year 2017, the USD fell almost 9%; the first annual decline since 2012. Its high for the year was way back on January 3rd when EUR/USD hit a low of 1.0341. Since that point, the euro is now up more than 13%, its biggest advance since 2003, and is the largest G-10 gainer against the US currency this year. The US Dollar’s decline came despite the stock market recording more than 70 fresh all-time highs during the year and three hikes in interest rates from the Federal Reserve Bank. Donald Trump is still President of the United States, a historic tax reform bill has been passed and the money markets are pricing further interest rate hikes next year. Current overnight Fed Funds Futures are pricing in a 95.2% probability of a hike by December 2018, with a 37.1% expectation for rates to be between 1.75 and 2% and 25.8% expectation for rates to be between 2 and 2.5%. For the next ‘live’ FOMC meeting in March, money market pricing reflects a 54% probability of a 25bp hike to 150-175bp. For the last week, none of these potential US Dollar positives seemed to matter. As the New Year begins, it will, as ever, be fascinating to see how investor sentiment evolves.