U.S. Dollar Faces Modest Decline in 2026 Amid Fed Rate Cuts and Global Growth

The U.S. dollar is projected to weaken further in 2026, continuing its downward trend after a surprising slide triggered by former President Donald Trump's tariff plans earlier this year. Analysts attribute the decline to anticipated Federal Reserve rate cuts and resilient global growth, which may reduce demand for dollar-denominated assets.

Despite a 7% year-to-date drop against a basket of foreign currencies—with an intra-year decline as steep as 10%—the greenback remains the world's dominant reserve currency. Deutsche Bank's global head of FX research, George Saravelos, notes: "We project further dollar weakness but at a slower pace than 2025, leaving the trade-weighted dollar 10% weaker by end-26."

The shift marks an inflection point after a decade-long bull cycle for the dollar, during which global investors heavily favored U.S. stocks and bonds. While far from the apocalyptic 'de-dollarization' scenarios floated by some commentators, the trend carries tangible implications—from travel expenses and import costs to portfolio adjustments and inflationary pressures.