Forex strategists cite modest US outperformance and expected rate convergence with peers as reasons to maintain a weaker dollar outlook.
TD Securities forex strategists are maintaining their bearish US dollar forecast for 2026, despite stronger US economic data and geopolitical tensions involving Iran. The bank’s team argues that recent gains do not signal a fundamental shift in the dollar’s trajectory, as US momentum remains middling compared to global peers rather than a clear outlier.
While the dollar has risen amid the US-Iran conflict, it remains below its 2022-23 highs. Core inflation globally lacks broad-based upside, reducing the likelihood of prolonged rate hikes across major economies. The Federal Reserve is expected to drop its easing bias but stay on hold, with full rate hikes seen as premature.
Strategists anticipate dollar downside later in 2026 as rest-of-world growth stabilizes, geopolitical risk premiums fade, and the ECB’s moderate hikes narrow the rate gap with a static Fed.