USD: Gradual depreciation outlook – BNP Paribas

BNP Paribas analysts expect the US economy to grow above potential in 2026, with GDP at 2.7% and inflation at 3.1%, keeping the Federal Reserve on hold with the Fed Funds target range at 3.5%-3.75%. Despite this resilience, they forecast the Dollar will continue to depreciate against the Euro into late 2026.

Dollar seen weakening versus Euro

"The US economy is expected to grow above its potential pace in 2026, with an average annual growth rate of +2.7%, a yearly improvement (+2.1% in 2025)."

"The inflation overshooting of the target is set to continue (+3.1% in 2026) until at least 2028 due to tariffs – although the impact of these appears to be less significant than expected – and the rise in oil prices."

"The FOMC implemented three rate cuts (-75 bps cumulative) in total in 2025, and we expect the Fed Funds target range to be held steady at 3,5% - 3,75% throughout 2026."

"We expect the dollar to continue depreciating against the euro."

"Conversely, we anticipate a slight depreciation of the yen and the GBP against the dollar (USD/JPY 160 and GBP/USD 1.3 in Q4 2026)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)