Deutsche Bank, Goldman Sachs and other Wall Street banks expect the US dollar to resume its decline in 2026 as the Federal Reserve continues to gradually cut interest rates. The dollar has stabilized in the past six months after falling by its biggest rate since the early 1970s in the first half of the year, when the trade war launched by President Donald Trump caused chaos in global markets. But strategists expect the dollar to weaken again in 2026 as the US Federal Reserve continues to ease monetary policy, while other central banks hold interest rates steady or move to raise them. Interest rate discrepancy stings the dollar. This discrepancy will motivate investors to sell US debt and transfer liquidity to countries that offer high interest rates. As a result, analysts at more than six major investment banks expect the dollar to fall against major currencies such as the yen, euro and pound sterling. Another point of view: “Citigroup”: Hedge against the rise of the dollar, according to consensus estimates compiled by “Bloomberg”, the widely followed dollar index is expected to fall by about 3% by the end of 2026. The US dollar…weakness on the way, said David Adams, head of foreign exchange strategy for the first half of the Stanley ten% in the dollar, which the Stanley ten% group will fall in the first half of the dollar. year: “There is plenty of room for the markets to internalize expectations of a larger rate cut.” He adds: “This leaves plenty of room for further dollar weakness.” The dollar’s decline is expected to be weaker and less extensive than this year, when its value against all major currencies fell, sending the Bloomberg Dollar Spot Index down about 8% in its deepest annual decline since 2017. You may also be interested in: “RBC”: The dollar may fall 40% in the Internet bubble. Expectations hinge on the assumption of continued weakness in the US labor market, which remains uncertain given the sudden flexibility. For the post-pandemic economy, currency forecasting is also a major challenge. Why did the dollar fall and will it fall late last year due to investors flocking to what is known as “Trump’s trade” taking advantage of his growth-stimulating policies? Strategists had expected the rise to reverse course by mid-2025, but they were surprised by the size of the decline in the first half of the year. Strategists now see the general trends as the new year approaches, paving the way for a decline in the dollar, coinciding with their estimates that the Federal Reserve will cut interest rates twice next year. With a quarter of a percentage point for each cut, and the Federal Reserve Chairman that Trump chooses to replace Jerome Powell, he could bow to pressure from the White House and lower interest rates further. More about the candidate closest to the presidency of the US Central Bank: How will the world’s impact on the dollar and vice versa? At the same time, the European Central Bank is expected to maintain interest rates at their current level, while the Bank of Japan is gradually raising interest rates. Louis Oganes, head of global macroeconomic research at JPMorgan in London, said at a press conference on Tuesday: “We see that the risks are more against the dollar than in its favor.” The weakening of the dollar has a cascading effect on the US economy in general, as it raises the cost of imports, increases the value of companies’ profits from abroad, and boosts exports – which may be welcomed by the Trump administration, which has criticized the US trade deficit. This could extend the waves of growth in emerging markets as investors shift their money to them in an attempt to take advantage of high interest rates. Also read: Jonathan Levin: Wishes for a weak dollar raise concerns as “interest trading” deals materialize The “interest trading” in emerging markets – which is based on borrowing from low-interest countries and investing in places with higher returns – has achieved the largest returns since 2009. Both JP Morgan and Bank of America see the potential for this trade as a point to achieve the additional currencies of Brazil and Asia, currencies such as the South Korean won and the Chinese yuan, respectively. Goldman Sachs analysts led by Kamaxya Trivedi said this month that the market has begun to price in more economic expectations. Other currencies within the G10 group – such as the Canadian and Australian dollars – were upbeat following the release of stronger than expected data. They pointed to “the dollar’s tendency to fall when the performance of the rest of the world’s economies improves.” Opponents who expect the dollar to rise against some other major currencies point mainly to the strength of the US economy. Analysts at Citigroup and Standard Chartered said this growth, fueled by the artificial intelligence boom, would attract investment flows to the United States, boosting the value of the dollar. Wednesday’s action highlighted the possibility of better-than-expected growth, after Federal Reserve policymakers revised their expectations for 2026. However, they cut interest rates by a quarter point and continue to expect another similar cut over the next year. More on the decision: In line with expectations… The Fed cuts interest rates for the third time by 25 basis points Interest rates Jerome Powell also reassured the markets about any fears that the Fed could move in the direction of interest rates, indicating that the current debate is focused on the question of whether to keep cutting interest rates or to maintain them at their current level of inflation, in light of the balance of inflation and the inflation above. target level. His comments caused relief in markets as some traders feared the Fed would send a tougher message. Also read: Powell signals a temporary pause in the monetary easing cycle next year, and with the drop in bond yields, the Bloomberg Dollar Index fell 0.7% on Wednesday and Thursday, the biggest two-day drop since mid-September, as traders prepared to resume the rate-cutting cycle. “The dollar is more expensive than its fair value.” In an annual forecast note to clients late last month, George Saravelos of Deutsche Bank, head of global foreign exchange research in London, and his colleague Tim Baker in New York, wrote that the dollar had benefited from a “remarkably resilient” economy and rising US stock prices. However, they noted that the dollar was valued at more than its fair value. They expected it to fall against other major currencies next year as growth recovers and equity yields rise in other regions. They concluded: “If these expectations come true, they will confirm that the dollar’s unusually long upward cycle during this decade has ended.”