Deutsche Bank expects the U.S. dollar to weaken further in 2026, although the decline is likely to be slower than what was seen this year.
Over the past twelve months, the dollar index — which tracks the greenback against a basket of major currencies — has dropped by more than 6%.
A series of policy decisions under President Donald Trump weighed heavily on the dollar throughout 2025. These included broad tariffs, concerns about rising U.S. government debt, and renewed questions about the Federal Reserve’s independence.
In a research note, analysts George Saravelos and Tim Baker said the initial shock to the dollar following Trump’s return to the White House in early 2025 is “now over.”
They added that current valuations, balance-of-payments trends, and relative monetary policy cycles all point toward continued but gradual dollar weakness. The analysts forecast that the trade-weighted dollar could be about 10% lower by the end of next year.
If this outlook plays out, it would signal the end of the unusually long dollar bull cycle that has defined much of this decade.
The analysts also highlighted the role of artificial intelligence as a key factor creating “two-sided risks” for the U.S. currency. Continued breakthroughs in AI and sustained capital investment could lift U.S. productivity, potentially supporting the dollar through faster growth and stronger capital inflows.
However, the benefits of AI may expand globally rather than remain concentrated in the United States. If productivity gains spread to other regions, it could reduce the dollar’s long-term advantage.
They warned that a more negative scenario for the dollar would involve a sharp and disorderly reversal of the current investment boom if AI-driven spending proves unprofitable, or if the technology’s early effects disrupt the labor market more severely than expected.
On Thursday, the U.S. dollar made slight gains in thin holiday trading due to Thanksgiving. Even so, the currency remains on track for its biggest weekly decline in four months.
By 04:49 ET (09:49 GMT), the dollar index had ticked up 0.1% to 99.69.
Analysts also noted reports suggesting that White House economic adviser Kevin Hassett is now the leading candidate to become the next Federal Reserve Chair. His preference for aggressive interest rate cuts could further pressure the dollar.
