• HSBC forecasts the U.S. dollar could find a floor by early 2026, with a subsequent rebound.
  • The bank anticipates a single Fed rate cut in December 2025 but sees little room for additional easing in 2026.
  • This contrasts with market pricing, which implies roughly 85 basis points of cuts by the end of 2026.

HSBC Holdings plc has laid out a contrarian view on the U.S. dollar, suggesting the currency’s decline may be nearing its end. In a recent analysis, the global bank projected the dollar could bottom out by early 2026 before regaining strength, a call predicated on a more hawkish path for the Federal Reserve than what is currently priced into financial markets.

While market participants are betting on a series of rate cuts extending through 2026, HSBC expects the Fed to deliver only one cut in December of 2025. The likelihood of further monetary easing the following year is limited, according to the bank’s economists. This divergence is significant; markets are positioned for about 85 basis points of easing by the conclusion of 2026, creating potential for a sharp repricing that would support the dollar.

"The market's expectation for a prolonged easing cycle is likely overdone," said a strategist familiar with the matter, who noted that resilient U.S. economic data could stay the Fed's hand. HSBC’s own robust financial performance, including a 16.4% return on tangible equity in the third quarter, underscores the kind of stable macroeconomic environment that may limit the need for deep rate cuts.

For currency pairs, this translates into a specific forecast. HSBC sees the euro climbing to $1.20 in late 2025 and early 2026, a move that reflects the near-term downward pressure on the dollar from the initial Fed cut. However, as the prospect of further U.S. easing fades, the bank expects the euro to retreat and trade around $1.18 for the remainder of 2026. This would leave the common currency weaker than many analysts currently project.

Efforts to obtain further comment from HSBC’s treasury strategy team were unsuccessful ahead of the European market open. The bank’s outlook arrives amid a broader restructuring of its own operations, including a focus on cost management and global markets, which produced $17.9 billion in total revenue last quarter. As central bank policies continue to diverge, HSBC’s forecast suggests currency traders should prepare for a reversal in the dollar’s fortunes sooner than many anticipate.