JPMorgan: The US dollar is expected to weaken by 2026, but the risk of Fed rate hikes may shake this view.

Golden Finance reports that the currency strategist team at JPMorgan, led by Meera Chandan and Arindam Sandilya, had predicted a strengthening of the dollar after Trump took office this year. However, with the dollar performing its worst in 50 years in the first half of the year, the team had to quickly adjust their outlook. The team's view on the dollar turned negative in March and has remained so to this day. Strategists now expect the dollar to fall by about 3% by mid-2026, before stabilizing. However, analysts note that several key factors complicate the bank's bearish outlook. First, despite recent rate cuts by the Fed, U.S. interest rates remain higher than those of many other global Central Banks. They state that this makes global investors more inclined to keep their funds in the U.S., limiting the appeal of diversifying investments outside of the U.S. More broadly, the risk that JPMorgan is concerned about is that a rebound in the U.S. labor market or growth expectations could prompt traders to not only rule out the possibility of rate cuts next year but also increasingly raise their bets on potential rate hikes. 'Net bearish on the dollar for 2026, although not as much in magnitude and breadth as in 2025,' Chandan and her colleagues wrote.