TD Securities Sees US Dollar Neutral Near Term, Weaker Through 2026
TD Securities revised its US dollar forecast to a neutral stance in the near term, followed by a gradual weakening trend through 2026. The view is based on macroeconomic conditions and evolving Federal Reserve policy expectations.
Near-term, the US dollar is expected to trade in a range as markets weigh mixed US data and wait for clearer Fed guidance. Inflation concerns remain, but growth signals are not uniformly strong, limiting the odds of a decisive dollar breakout.
Over the medium term, TD Securities flags several headwinds for the US dollar: potential Fed rate cuts later in 2025 and into 2026, which would narrow the US interest-rate advantage; improving growth in other major regions—especially the eurozone and parts of Asia—pulling capital away from US assets; and lingering uncertainty around trade policy and fiscal dynamics that could gradually reduce demand for US holdings.
For traders, the report implies that upside momentum in the US dollar may fade. Currency positioning could shift toward hedging or trimming long dollar exposure. Meanwhile, currencies that have been pressured versus the US dollar—such as the euro and yen—could see relative gains. A weaker US dollar also typically affects global pricing by improving US export competitiveness while raising costs of imports.
For crypto markets, a softer US dollar often supports risk assets via liquidity and USD-denominated pricing dynamics, but the article also suggests a non-trending near-term phase, implying limited immediate FX catalysts.
Bullish
TD Securities’ base case is neutral for the US dollar in the near term, then weaker through 2026. For crypto traders, the key linkage is the likely medium-term USD headwind: a softer US dollar typically eases financial conditions and improves liquidity/risk appetite, which historically supports crypto and other risk assets.
In the short run, the “range-bound/neutral” US dollar expectation suggests limited FX-driven momentum—so near-term impact on crypto may be muted and volatility could remain driven more by rates, equities, and flows than by USD direction.
Over the longer horizon, the cited catalysts—expected Fed cuts (reducing rate differentials), improving non-US growth (diverting capital), and gradual valuation pressure on US assets—resemble prior periods where downward USD shifts tended to coincide with stronger bid for USD-denominated risk assets. Traders often respond by rotating out of USD hedge pressure and re-risking into high-beta assets, including crypto.
However, the path is described as gradual rather than a one-off break, so the bullish effect for crypto is likely to be more “drift upward / supportive backdrop” than a single-day rally trigger. Also, if the market interprets any inflation re-acceleration as delaying cuts, that could quickly reverse the USD bearish narrative—so crypto upside may remain sensitive to incoming US data.