TechFlow news, December 12 — According to Jinshi Data, Scotiabank analysts said the dollar has declined against most currencies this year, but this follows years of gains. Dollar bulls should not be complacent—the toughest test is yet to come. In its "2026 Outlook Focus" report, analysts Shaun Osborne and Eric Theoret maintain their view that the dollar will broadly weaken, a trend expected to continue through 2026 and into 2027. The core logic is simple—divergence in central bank policies. Scotiabank expects the Fed to cut rates significantly, lowering the target rate to 3% by the first half of 2026. Meanwhile, other major central banks are expected to hold steady or even tighten policy. This classic interest rate differential trade will erode the two pillars supporting the dollar's long-term strength: relatively higher economic growth and attractive yield spreads. Discussions about the end of "US exceptionalism" have been ongoing for some time, but Scotiabank believes the dollar's real pain point will emerge in the second or third quarter of 2026, when the US labor market slows while the Fed remains dovish.
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