The Bloomberg Dollar Spot Index is down about 8% this year so far. After falling in the wake of Donald Trump’s “Liberty Day” tariffs in April, the greenback is under continued pressure as the president begins his aggressive campaign to get a dovish appointee installed as Fed chair next year.

“The biggest driver of the dollar in the first quarter was the Fed,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “And not just the January and March meetings, but who will be the Fed Chair after Jerome Powell finishes his term.”

With at least two rate cuts priced in for next year, the US policy path diverges from some of its developed peers, further dampening the dollar’s appeal.

The euro surged against the greenback as poor inflation and a looming wave of European defense spending kept bets on the rate cut near zero. In Canada, Sweden and Australia, on the other hand, price traders are betting on the rise.

The dollar gauge rose as much as 0.2% Wednesday after Labor Department data showed applications for unemployment benefits in the US fell last week to one of the least level this year. The greenback index is still on track to finish December down about 1%.

This month, a short period of bullish positioning of the dollar returned to a more pessimistic stance dominated since April tariffs fueled concerns about the US economy, Commodity Futures Trading Commission data for the week ending December 16 show.

Right now, everything is about the Fed and who will replace Jerome Powell, whose term as chair is set to end in May.

Trump recently joked that he has a preferred candidate, but is in no rush to make an announcement – while also thinking he might unseat the current central bank leader.

National Economic Council Director Kevin Hassett has long been seen as a leading candidate, while Trump has also expressed interest in former Fed governor Kevin Warsh. Fed governors Christopher Waller and Michelle Bowman and BlackRock’s Rick Rieder are also seen in the running.

“Hassett may be more or less priced because he’s been leading for some time now, but Warsh or Waller probably won’t be as easy to cut, which is better for the dollar,” said Andrew Hazlett, a foreign exchange trader at Monex Inc.