Investing.com — According to Citi analysts, the US dollar may experience a ephemeral weakening in December due to a wave of central bank meetings.

Nine of the ten G10 central banks will meet over the next three weeks, with five – including the Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BoJ), the Bank of Canada (BoC) and the Swiss National Bank (SNB) – is expected to announce interest rate adjustments, Citi explained.

They emphasize that market expectations are currently in line with the more hawkish stance of the Fed and the more dovish stance of the ECB, BoJ and SNB. However, Citi’s currency strategy team predicts a different outcome.

“If markets re-price and central banks make changes as we expect, we expect this could lead to a slightly lower dollar,” analysts said.

Data from the US and Canada will play a key role in shaping market sentiment, in particular labor market data, which will be released on Friday, December 6, says Citi.

For the ECB, BoJ and SNB, Citi sees less immediate risk of significant market surprises, but expects increasing convergence in market expectations as their meetings approach.

In the near term, the dollar may shift towards relative interest rate dynamics rather than being strongly influenced by US policy developments.

Citi notes the potential for a “tightening” if central bank actions are in line with their forecasts, which they say “seems more likely as we look at the broader central bank landscape in the coming weeks.”

Despite the expected near-term decline in the USD, Citi remains strategically bullish on the dollar in the first half of 2025.

“We would like to take advantage of any USD declines in December to build long positions for the first half of 2025.” – concluded the analysts, emphasizing their confidence in the broader strength of the dollar heading into the novel year.