Insights

The U.S. dollar weakened against most major currencies in December, with the exception of the Japanese yen. Dollar selling persisted even after the Fed delivered a rate cut alongside a dot plot pointing to only one additional cut in 2026. Markets judged the outcome as less hawkish than expected, maintaining expectations for more than one rate cut in 2026. This view was reinforced by softer labor‑market and inflation data, which outweighed an exceptionally strong Q3 GDP print, as well as by Chair Powell’s emphasis on downside risks to employment rather than persistent inflation.

The yen was the weakest performer. It declined despite a BoJ rate hike and guidance that further tightening could follow, as traders were disappointed by the lack of clarity on the timing of future hikes. Verbal intervention warnings helped the yen recover briefly, but the rebound proved short‑lived.

Sterling and the euro both outperformed the dollar. The pound rose even as the BoE cut rates, with policymakers signaling that the most accommodative phase of easing was complete. The euro was supported by the ECB’s upward revisions to growth and inflation forecasts, reinforcing expectations that rate cuts are largely behind it.

The Canadian and Australian dollars led gains after both the BoC and the RBA signaled the end of their easing cycles, with the RBA explicitly noting that rate hikes could return in 2026 if inflation remains sticky. Gold reached fresh record highs late in the month on dovish Fed expectations but fell sharply on December 27 amid profit‑taking and higher margin requirements imposed by the CME.

As December marks the close of the year, it is an appropriate moment to step back and assess the year for the IXI Fund. From a performance perspective, the year can be clearly divided into two distinct phases: the period leading up to August and the period that followed. The first phase delivered the expected returns, reflecting a market environment that was well aligned with our strategy. In contrast, the latter part of the year was characterized by a material shift in market dynamics, with a persistent low‑volatility environment creating a more challenging backdrop in which our strategy struggled to gain traction. Losses accumulated during this second phase, including a frail December, resulted in an overall negative return for the year.

Despite this outcome, our conviction in the robustness of our strategy remains intact. We remain confident that the prevailing market conditions are likely to normalise soon, in a manner similar to previous years that once again favors our strategy. Importantly, we are not standing still. Significant research efforts have been dedicated to further optimise signal execution, and we expect these initiatives to translate into meaningfully lower execution costs. While these enhancements are already underway, we anticipate their full impact to become evident into 2026, providing an additional tailwind to performance. On behalf of everyone at IXI, we reaffirm our commitment to applying our full focus, discipline, and effort toward the delivery of a high‑quality investment product and the generation of long‑term value for our investors. We would like to wish you a happy and prosperous 2026.