ING expects the U.S. dollar to remain supported through the first quarter of 2027 on strong economic growth, then weaken in the second quarter if headline inflation moves toward the Federal Reserve’s 2% goal and short-term U.S. rates decline.
Chris Turner, ING’s global head of markets and regional head of research for UK and CEE, presents the change as conditional on inflation and Fed policy. The bank expects the Fed to stay hawkish in the opening quarter before short-term U.S. rates fall in the second quarter.
Recent economic data provide context for the forecast. The Bureau of Economic Analysis (BEA) estimated that real gross domestic product (GDP) grew at a 3.4% annual rate in the third quarter of 2026, up from 2.2% in the second quarter. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 3.7% over the 12 months through September.
The Fed held its target range at 3.75% to 4.00% on Oct. 28 in a 10-2 vote. Two officials favored a quarter-point increase. The Fed said it would use incoming information to guide its policy assessment; its decision did not commit to the rate path in ING’s forecast.
Turner links the possible second-quarter decline in rates to energy-related effects fading from annual inflation comparisons, which could bring headline inflation closer to the Fed’s goal. This is ING’s explanation for its outlook, not a confirmed inflation outcome.
The October CPI report is scheduled for 8:30 a.m. ET (13:30 UTC) Tuesday, Nov. 10. Reuters reported that economists in its poll expected headline inflation of 3.9% and core inflation of 2.8% year over year. The BLS has said it will not publish year-over-year changes for most CPI series without October 2025 data for comparison.
ING also sees the euro trading between $1.10 and $1.15 against the dollar over the next four to five months, with a possible move toward $1.18 by year-end 2027. The next scheduled Fed decision is Dec. 8-9.
