The U.S. dollar experienced mostly choppy and mixed trading on Thursday, posting a slightly bullish lean during Asian hours before turning decisively lower through London and US sessions, ultimately closing as a net loser against most major currencies.
During the Asian session, the dollar traded with an arguably net bullish lean, possibly reflecting cautious positioning ahead of the day’s heavy calendar of central bank decisions and US inflation data. New Zealand’s stronger-than-expected GDP data (1.1% q/q versus 0.8% forecast) provided early support to the kiwi, though markets appeared unconvinced about the durability of the recovery given household consumption remained soft.
The London session marked the first clear directional shift, with the dollar briefly trading net higher in early European hours before turning lower ahead of the US open. This initial strength may have reflected positioning adjustments following the Bank of England’s 7:00 am ET rate decision, which delivered an expected 25 basis point cut but included notably hawkish commentary from Governor Bailey about “more limited space” for future reductions. However, this dollar bid proved short-lived as traders likely began positioning for the upcoming US CPI release, with the greenback weakening steadily into the 8:30 am ET data.
The US session brought the most decisive move, with the dollar turning net bearish and choppy immediately following the 8:30 am ET inflation data. The core CPI print of 2.6% year-over-year—well below the 3.0% consensus and the slowest pace since early 2021—sparked sharp dollar selling that appeared to outweigh the significant data quality concerns raised by economists. The move likely reflected traders focusing on the directional implications for Fed policy rather than the reliability of the specific figures, with Fed rate cut expectations for 2026 climbing notably despite Fed Chair Powell’s warning that the data “may be distorted” by the government shutdown.
The dollar’s weakness persisted through the afternoon, possibly on signals from European central banks that their rate cutting cycles are likely over. The ECB’s decision to hold rates at 2.0% came with reports that officials view the cutting cycle as likely finished, while BOE’s Bailey warned that future rate cuts will be “finely balanced” as they approach neutral.
Upcoming Potential Catalysts on the Economic Calendar
- New Zealand Balance of Trade for November 2025 at 9:45 pm GMT
- Japan Consumer Price Index Growth Rate for November 2025 at 11:30 pm GMT
- New Zealand ANZ Business Confidence for December 2025 at 12:00 am GMT
- U.K. GfK Consumer Confidence for December 2025 at 12:01 am GMT
- Australia Private & Housing Sector Credit for November 2025 at 12:30 am GMT
- New Zealand Credit Card Spending for November 2025 at 2:00 am GMT
- BOJ Gov Ueda Speech at 2:30 am GMT
- Bank of Japan Interest Rate Decision for December 19, 2025 at 3:00 am GMT
- Australia Commodity Prices for December 2025 at 5:30 am GMT
- Germany PPI for November 2025 at 7:00 am GMT
- Germany GfK Consumer Confidence for January 2026 at 7:00 am GMT
- U.K. Retail Sales for November 2025 at 7:00 am GMT
- U.K. CBI Distributive Trades for December 2025 at 11:00 am GMT
- Canada Retail Sales Prel for November 2025 at 1:30 pm GMT
- Canada New Housing Price Index for November 2025 at 1:30 pm GMT
- Euro area Consumer Confidence Flash for December 2025 at 3:00 pm GMT
- U.S. Existing Home Sales for November 2025 at 3:00 pm GMT
- UoM U.S. Consumer Sentiment Index for December 2025 at 3:00 pm GMT
- Euro area ECB Lane Speech at 3:10 pm GMT
Friday’s calendar is dominated by the Bank of Japan’s highly anticipated policy decision at 3:00 am GMT, where markets are watching for any signals about the timing of future rate hikes given recent yen weakness and sticky Japanese inflation.
UK retail sales at 7:00 am GMT will provide crucial insight into consumer resilience following Thursday’s BOE rate cut and Governor Bailey’s cautious outlook, with weak numbers potentially reinforcing concerns about economic stagnation.
During the US session, the University of Michigan consumer sentiment survey could spark volatility if inflation expectations show any material shift, though following Thursday’s distorted CPI data, traders may place greater weight on the December reading due in early January for a clearer picture of underlying price pressures heading into 2026.
Stay frosty out there, forex friends, and don’t forget to check out our Forex Correlation Calculator when planning to take on risk!
