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

Jinse Finance reported that JPMorgan's currency strategist team, led by Meera Chandan and Arindam Sandilya, had previously predicted that the US dollar would strengthen after Trump took office as president this year. However, as the dollar posted its worst first-half performance in 50 years, the team had to quickly adjust its outlook. The team's view on the dollar turned negative in March and has remained so ever since. Strategists now expect the dollar to decline by about 3% by mid-2026, then stabilize. However, analysts point out that several major factors complicate the bank's bearish outlook. Firstly, despite the recent rate cuts by the Federal Reserve, US interest rates remain higher than those of many other global central banks. They stated that this makes global investors more inclined to keep their funds in the US and limits the appeal of diversifying into assets outside the US. More broadly, JPMorgan is concerned that a rebound in the US job market or growth expectations could prompt traders not only to rule out the possibility of rate cuts next year but also to increasingly bet on potential rate hikes. "We remain net bearish on the dollar in 2026, although the magnitude and breadth are both less than in 2025," Chandan and her colleagues wrote.