USD December Seasonality: Historical Patterns Point to Year-End Weakness

Historical seasonality data suggests the US Dollar typically weakens in December, with analysis of the past 20 years showing negative returns in 65% of December periods. EUR/USD historically gains an average of 0.8% during December, currently trading at 1.0485 with potential to test 1.0600 if seasonal patterns hold. GBP/USD shows even stronger December performance, averaging +1.2% gains, with current levels at 1.2650 targeting 1.2800. USD/JPY typically declines 0.6% in December, already showing signs of seasonal weakness at 155.65. AUD/USD demonstrates the strongest seasonal gains, averaging +1.5% in December, currently positioned at 0.6480 with upside potential to 0.6600. The seasonal weakness is attributed to year-end portfolio rebalancing, reduced liquidity, and profit-taking in dollar longs. However, traders should note that 2025's unique macro environment, including persistent inflation concerns and Federal Reserve policy uncertainty, could override traditional seasonal patterns.