U.S. Dollar Outlook 2026: Rabobank’s Jane Foley Warns Against Assuming a One-Way Decline

As financial markets look ahead to 2026, a growing number of major banks are forecasting a weaker U.S. dollar, driven by expectations of Federal Reserve rate cuts, easing inflation pressures, and narrowing interest rate differentials with other major economies. Several institutions now anticipate that the dollar’s recent decline could extend into next year, potentially marking one of its weakest multi year performances since the early 2000s.

However, Jane Foley, Head of FX Strategy at Rabobank, has cautioned against assuming that the dollar is headed for a smooth or sustained downward trajectory. Instead, Foley argues that the greenback is more likely to trade in volatile, choppy ranges, reflecting competing macroeconomic forces rather than a decisive loss of confidence in the currency.

Broad Dollar Weakness Forecasts

The bearish dollar narrative is rooted in shifting monetary policy expectations. Markets increasingly expect the U.S. Federal Reserve to move towards interest rate cuts in 2026 as inflation moderates and economic growth cools. According to Reuters, the dollar is already on course for its worst annual performance since 2003, as investors anticipate a transition away from restrictive monetary policy and reassess the relative attractiveness of U.S. assets.

Other banks, including Lloyds and Goldman Sachs, have echoed this outlook, forecasting that currencies such as the euro and Australian dollar could outperform the greenback as global growth broadens and capital flows diversify away from the U.S. dollar’s long standing dominance.

Rabobank’s More Cautious Assessment

Despite this consensus, Rabobank’s Jane Foley stresses that dollar weakness is unlikely to be linear. In comments reported by Reuters and FX market analysts, Foley points to the continued resilience of the U.S. economy as a key factor limiting downside risks for the currency. Strong labour market data, relatively robust consumer spending, and the dollar’s safe haven status during periods of global uncertainty could all provide intermittent support .

Rather than a prolonged sell off, Foley suggests that these dynamics will produce two way trading, with periods of dollar weakness followed by corrective rebounds.

Market Positioning and Volatility

Another factor underpinning Rabobank’s range bound outlook is market positioning. Analysts note that speculative positioning in foreign exchange markets has played a significant role in recent dollar moves. When positioning becomes heavily skewed towards dollar weakness, even modest shifts in sentiment can trigger sharp reversals.

According to Rabobank’s EUR/USD outlook, these technical and positioning-driven factors make sustained directional trends harder to maintain, increasing the likelihood of volatile swings within defined ranges rather than a clear downward path.

Policy Uncertainty Remains Central

Uncertainty surrounding U.S. monetary policy also weighs heavily on the outlook. While markets broadly expect rate cuts, the timing, scale, and pace of easing remain uncertain. Any signs that inflation proves stickier than anticipated, or that the Federal Reserve adopts a more cautious approach, could quickly support the dollar.

At the same time, uncertainty around policy decisions from other major central banks, including the European Central Bank and the Bank of England adds further complexity, reinforcing Rabobank’s view that currency markets are entering a phase dominated by volatility rather than trend .

A Range Bound Dollar, Not a Collapse

In summary, while many banks forecast a weaker U.S. dollar in 2026, Rabobank’s Jane Foley urges caution against expectations of a sharp or uninterrupted decline. Her analysis suggests that the dollar will remain supported by U.S. economic resilience, shifting market positioning, and persistent policy uncertainty, resulting in choppy, range bound trading rather than a decisive breakdown.

For investors and policymakers alike, the message is clear:

The dollar’s dominance may be softening, but reports of its imminent collapse appear premature.

Aaron Joyce, Newswire, L.T.T Media; Newsdesk;

30 December 2025