The U.S. dollar is on track for further weakness through the end of the year as the Federal Reserve resumes its rate-cutting cycle, according to ING economists. Markets are now pricing in a 125–150 basis point easing without clear signs of an imminent U.S. recession, creating a favorable backdrop for risk assets and non-dollar currencies.
Following July’s soft U.S. jobs data, investors have adopted a positive outlook, viewing the dollar’s decline as a healthy adjustment. The combination of a steepening U.S. yield curve, steady equity markets, and expectations of three Fed rate cuts supports projections for EUR/USD to climb toward 1.20 by year-end. Seasonal dollar weakness is also expected to add momentum.
This outlook highlights the powerful influence of monetary policy in G10 foreign exchange markets. The euro, British pound, and Australian dollar are well-positioned to sustain gains, while the Japanese yen faces uncertainties from possible leadership changes in Japan’s ruling Liberal Democratic Party and shifting Bank of Japan policy.
In emerging markets, the Chinese yuan remains relatively stable despite trade tensions, while the Indian rupee, Indonesian rupiah, and Philippine peso face headwinds from tariffs and geopolitical risks. By contrast, Latin American currencies are benefiting from high yields, and the Czech koruna shows stronger fundamentals compared to Hungary’s forint, which is largely supported by carry trade demand.
ING’s analysis suggests that as the Fed embarks on a new easing cycle, the dollar is likely to remain under pressure. A weaker dollar favors a risk-on environment, boosting global growth prospects and activity-linked currencies. Despite challenges from tariffs and bond market volatility, resilient risk appetite and central bank policy shifts are expected to keep investors focused on opportunities beyond the U.S. dollar.