The first week of December opens with a meaningful adjustment in global FX sentiment. The dollar weakened as several US activity indicators slowed, Eurozone inflation eased again and Japan surprised markets with a more assertive policy tone. At the same time, the United Kingdom entered the new month with a brief period of stability following the Autumn Budget. These developments matter because they arrive just ahead of critical central bank decisions later this month, and the shifts now emerging across yields, data and expectations will influence how currencies trade in the coming days. The landscape is becoming more balanced as US exceptionalism fades at the margin, while Europe, Japan and the commodity bloc show a broader mix of stabilisation and policy reassessment. 

Below is the currency-by-currency outlook for the week ahead, written to give readers a clear sense of what is driving markets now and what is likely to shape the next move. 

United States Dollar (USD) 

The dollar begins December on the back foot after a quieter but noticeably softer run of data. Manufacturing activity remained subdued, private hiring signals weakened and jobless claims drifted higher. These indicators encouraged markets to push further toward the expectation of a Federal Reserve cut later this month. The immediate impact has been a decline in Treasury yields, which reduces the dollar’s rate advantage and leaves USD trading with a heavier tone. 

Short-term direction now hinges on whether incoming US data confirms this slowdown. If ISM surveys, labour indicators and the upcoming inflation prints remain weak or even broadly in line with softer trends, the market will feel increasingly comfortable with a December cut. In that scenario the dollar is likely to remain under pressure throughout the week as investors begin to position for the first step of the easing cycle. A meaningful rebound in USD this week would require firmer US data or explicit pushback from Fed communication, neither of which appears the base case at this stage. 

Euro (EUR) 

The euro benefitted from the combination of a softer dollar and steady disinflation at home. Eurozone inflation continued to ease, reinforcing the view that the ECB has little reason to adjust policy in the near term. This stability is important because the euro is trading largely as a relative rates story, and the gap between the ECB and the Fed appears more likely to narrow than widen as December progresses. 

As the week develops, the euro should remain supported as long as US yields stay subdued and Eurozone indicators continue to stabilise. German yields firmed slightly on the back of domestic inflation surprises, adding to the impression that Europe is past the worst of its economic slowdown. Seasonal patterns also lean in favour of euro strength at this time of year. Provided there are no significant downside shocks in European data, EURUSD enters the week with room to extend its recovery. 
 

British Pound (GBP) 

Sterling enters December with a calmer fiscal backdrop and a constructive tone after the Autumn Budget restored some confidence in the UK’s debt trajectory. The rebuilding of fiscal headroom encouraged renewed interest in gilts and supported the pound against the dollar. Against the euro, the move was more modest and remains constrained by longer-term structural concerns. 

This week the pound’s direction is likely to be shaped by two forces. First, the broader dollar trend, which currently favours a firmer GBPUSD profile as markets grow more confident in the likelihood of a Fed cut. Second, the approach of the December Bank of England meeting, where investors already anticipate a cut. Sterling can hold steady in the near term, but without stronger domestic data or clearer evidence of improving UK growth momentum, any gains are likely to remain limited. Short-term moves therefore depend heavily on global factors, while the longer-term outlook still carries meaningful structural challenges. 
 

Japanese Yen (JPY) 

Japan delivered the most significant surprise of the week as Governor Ueda signalled that the Bank of Japan is actively considering the merits of a rate increase. That shift altered market expectations quickly and lifted the yen. This matters because USDJPY has been held aloft for years by a wide policy gap between the United States and Japan. If the Fed cuts while the BoJ tightens or even holds a more hawkish line, that gap narrows and the yen becomes significantly more attractive. 

The likely outcome for this week is continued yen resilience, particularly if US yields decline further. Investors will watch closely to see whether Japanese officials reinforce this new tone or allow markets to interpret the comments as a one-off. Even modest follow-through could prompt a more sustained correction lower in USDJPY as December progresses. 
 

Swiss Franc (CHF) 

The franc softened slightly as the month opened, driven more by improved global risk appetite than by domestic developments. Switzerland’s recent GDP contraction and subdued inflation leave the SNB with little incentive to adjust policy soon. As a result, the franc continues to trade as a sentiment barometer. When volatility is low, CHF tends to ease. When markets become unsettled, it strengthens with speed. 

This week’s likely outcome is a continuation of that behaviour. Unless global risk sentiment deteriorates sharply, the franc will probably remain on the softer side against both the euro and the dollar. 
 

Canadian Dollar (CAD) 

The Canadian dollar strengthened after GDP delivered a strong upside surprise, with the economy expanding far faster than expected on an annualised basis. Housing activity, government spending and an improved external balance all contributed. Although consumption and business investment remain subdued, the headline resilience was enough to shift the currency into a stronger position. 

For the week ahead, CAD performance will depend on whether upcoming employment and PMI figures confirm this positive signal. If they do, the Canadian dollar is likely to remain supported, especially if US yields fall further. If the data softens, momentum may fade, but the tone entering the week is clearly constructive. 
 

Australian Dollar (AUD) 

The Australian dollar began December on firmer footing after domestic inflation rose again, reducing the likelihood of further RBA cuts. Higher local yields provide a clearer argument for AUD appreciation, particularly when set against a softening USD backdrop. Australia remains closely tied to China’s cycle, but the immediate driver is domestic inflation, which has shifted expectations in favour of a steadier policy stance. 

If GDP and trade data this week show resilience, the Australian dollar should extend gains. If they disappoint, AUD may pause, but the broader environment remains more supportive than it has been for several months. 
 

New Zealand Dollar (NZD) 

The New Zealand dollar was the strongest performer across the G10 last week. The RBNZ delivered a final rate cut and announced the end of its easing cycle, creating a clear policy anchor for the currency. Confidence indicators have improved, and rate differentials now act in NZD’s favour. 

Short-term direction depends largely on US developments rather than domestic catalysts, as New Zealand’s calendar is quiet. If the dollar remains weak, NZD should continue to outperform. If US data surprises to the upside, the kiwi may consolidate, but the structural shift in policy guidance gives it a firm base. 
 

Norwegian Krone (NOK) 

The krone benefitted from firmer oil prices and improved global sentiment. Mainland GDP is flat, but petroleum activity remains an important source of support. NOK tends to follow energy markets closely, and with oil stabilising, the currency enters this week with a constructive bias. 

Unless risk sentiment deteriorates, the krone is likely to remain supported throughout the week, especially if the dollar continues to drift lower. 
 

Swedish Krona (SEK) 

Sweden posted some of the strongest data in the G10, with GDP expanding at a healthy pace and business surveys turning higher. The next piece of the puzzle is inflation. If price pressures continue to build, markets may reassess their expectations for Riksbank easing and tilt toward a more neutral or even mildly hawkish stance. 

For the immediate week ahead, SEK is likely to trade with a firmer tone. Stabilising European data and softer US yields create a supportive environment, and the krona appears well positioned if incoming inflation data confirms the recent momentum shift. 
 

As December begins, the G10 landscape is more balanced than it has been for months. The dollar is weakening as US yields fall. Europe is steady through disinflation. Japan is signalling a potential shift toward policy normalisation. Commodity currencies are finding support from improving domestic stories and firmer global sentiment. The United Kingdom has achieved short-term calm, though deeper structural issues remain visible.

The central theme is the gradual unwinding of US exceptionalism. As policy divergence narrows, FX markets enter a phase where opportunities are more evenly distributed rather than concentrated in a single direction. Currencies backed by credible policy paths or improving fundamentals begin to recover, while the dollar adjusts to a world in which it no longer sits alone at the peak of the global cycle.