U.S. Dollar Expected to Weaken in 2026 Amid Anticipated Fed Rate Cuts, Says ING Analyst
Analyst Chris Turner from ING predicts that the U.S. dollar could lose strength next year, driven primarily by expectations of further Federal Reserve rate cuts. In a recent webinar, Turner explained that as the Fed shifts toward a more accommodative stance, the dollar’s yield advantage may diminish, making it less attractive compared to other currencies.
The reasoning is simple: high interest rates attract investors to dollar-denominated assets, boosting demand for the currency. If the Fed begins cutting rates, as widely anticipated, this dynamic could reverse, paving the way for a weaker dollar. ING has highlighted early warning signs, including softening U.S. labor-market data, moderate growth in some sectors, and market pricing increasingly reflecting potential policy easing.
Timing is critical. While inflation remains a concern, recent Fed commentary suggests the balance is tipping toward easing. Market expectations for a December rate cut have fluctuated — at one point, a 25 basis-point reduction seemed likely, but subsequent Fed remarks tempered that outlook. As a result, although a dollar decline appears likely, its pace and magnitude remain uncertain, and the window for significant weakness may be narrowing.
External factors could also influence the outcome. Trade surpluses in other countries, shifts in global capital flows, and currency-specific dynamics — such as the yen or euro — could offset the broader trend. For example, despite the general dollar-weakness narrative, the USD/JPY pair continues to test resistance near 155, showing that safe-haven demand and capital movements can complicate the picture.
