Global Themes

The dollar was modestly firmer on the penultimate trading day of the year. Still, movements among major currencies were at a minimum, a reflection of light holiday markets. The dollar is posed to clinch a winning year, though its gains have tapered over a mostly dismal December. The dollar has struggled this month after the European Central Bank (ECB) eased policy in underwhelming fashion, igniting a relief rally for the tattered single currency. A mix of seasonality factors and profit taking also contributed to the dollar's underperformance over the final month of the year. 

EUR

The euro ceded a few of its monthly gains against the dollar Wednesday but its overall movements were minimal in light year-end trade. Central bank policies will remain a chief driver of the euro in the coming year, boding bearishly for the shared currency of 19 nations and favorably for the buck. 

GBP

Sterling steadied after slumping to new eight-month lows on Tuesday. Underlying sentiment remained sterling-negative with uncertainty over Britain's tenure in the European Union serving as a significant sell signal, along with dampened expectations for the Bank of England to follow the Fed in lifting its lending rates from all-time lows anytime soon. 

USD

The dollar enjoyed a gain, though its overall movements were minimal as the clock ticked down on a strong year. Global monetary policies and their relative settings bode favorably for the dollar as it enters 2016. The ECB's still open door to easier policies differ vastly from the Fed's already underway campaign to nudge American base rates higher portends poorly for the euro and bullishly for the buck. What could challenge the strong dollar thesis in 2016? Low oil prices. The longer oil remains low, the more downward pressure it puts on inflation, something that could cause the Fed to fire fewer rate hikes over the coming year.