Morgan Stanley
2026 FX Outlook: The Year of Pivots
LIVE20 November 2025USD bearish
Back to CurrenciesBearish (H1), Neutral (H2)
USD/USD
USD bearish bias through mid-2026 driven by Fed cutting cycle, twin deficit conc
Key Drivers
Fed easing trajectory
Twin deficit dynamics
Global growth rotation
Relative productivity
Risk appetite cycle
All Firm Targets (Dec '26)
Analysis Summary
USD bearish bias through mid-2026 driven by Fed cutting cycle, twin deficit concerns, and global growth broadening. Expect a V-shaped recovery in H2 as relative US growth reasserts. DXY trough near 94 by Q2 before recovering to 99 by year-end.