TD Securities expects the US dollar to weaken after the Federal Reserve keeps interest rates unchanged

According to Odaily, Federal Reserve Chair Kevin Warsh will announce the Federal Open Market Committee (FOMC) interest rate decision on July 29. The market generally expects the benchmark interest rate to be held steady for the fifth consecutive time at 3.50% to 3.75%. CME FedWatch data shows that the probability of keeping the rate unchanged is between 95% and 98%.

TD Securities stated that traders continue to overestimate the probability of a surprise rate hike, and related pricing incorporates a risk premium stemming from the situation in Iran. The institution believes that if the Federal Reserve keeps rates unchanged as expected, the deviation between current market pricing and actual policy action will narrow.

TD Securities predicts that if the Federal Reserve maintains rates without hiking for a longer period, the US dollar will fall by about 2% in the second half of 2026. The institution believes the Federal Reserve will require clearer evidence of persistent inflation and a strong labor market before considering a rate increase.