Dollar Weakening Predicted as Fed Cuts Looms

ING analyst Chris Turner predicts that the U.S. dollar may weaken next year, citing anticipated interest rate cuts by the Federal Reserve. He explained that lower rates will reduce hedging costs for European investors, making it cheaper to hedge U.S. assets. This could result in an increased proportion of dollar assets being hedged, potentially driving down the dollar’s exchange rate. ING forecasts a 75 basis point rate cut from the Fed, and predicts the euro could reach 1.22 by the fourth quarter of 2026. This surge is driven by expectations for accelerated economic growth in the Eurozone fueled by German fiscal stimulus.