USD: Dovish Fed outlook points to softer USD in 2026 – ING

A dovish-leaning Fed and upcoming policy shifts abroad could weigh on the US Dollar (USD) into 2026, with key central bank meetings set for this week. While the Fed may resist validating aggressive easing expectations, seasonal softness and uncertainty over future leadership should cap USD upside, ING's FX analyst Chris Turner notes.

Global rate-cut cycles add to mild USD downside

"Assuming that the Federal Reserve stays in dovish mode – we'll find out more about that on Wednesday – a turn in the policy rate cycles overseas should be another factor contributing to a mildly weaker dollar in 2026. On this subject, we'll also get to hear from central bankers in Australia and Canada at their policy rate meetings on Tuesday and Wednesday this week."

"In terms of the US data calendar this week, we've got US JOLTS job opening data tomorrow and the FOMC meeting on Wednesday evening. The Fed could be a positive event risk for the dollar in that it seems hard for the Fed to validate the 90bp of easing priced into Fed Funds futures by early 2027."

"However, the potential formal nomination of Kevin Hassett as Fed Chair over the coming months and the seasonal factors keeping the dollar weak into year-end should limit the dollar's upside. For today, DXY could continue to trade in a tight 98.80-99.20 range."