TD Securities Forecasts Dollar Drop 2% if Fed Holds Rates Steady

TD Securities projects a 2% USD decline in H2 2026 if the Fed maintains the 3.50%-3.75% range, citing overpriced hike risks and inflation data needs.

Woofun AI reports that TD Securities anticipates a potential 2% depreciation of the US dollar in the second half of 2026 should the Federal Reserve maintain its current interest rate stance. The bank notes that market participants are currently overestimating the likelihood of an unexpected rate increase, with pricing reflecting a risk premium linked to geopolitical tensions in Iran.

TD Securities argues that if the Federal Open Market Committee keeps rates unchanged at 3.50% to 3.75% for an extended duration, the discrepancy between market expectations and actual policy will diminish. The institution emphasizes that the Fed requires more definitive evidence of persistent inflation and robust labor market conditions before contemplating any upward adjustment to interest rates.