Analysts Say U.S. Dollar Upside Limited Without Fed Rate Cuts Before March 2026

Key TakeawaysING Bank analyst Francesco Pesole said the U.S. dollar’s rally momentum appears limited, despite gains earlier this week.Dollar strength has been supported by reduced concerns over U.S. regional bank stability.Pesole noted that further upside is unlikely unless the Federal Reserve signals interest rate cuts before March 2026.The key risk event this week remains Friday’s U.S. inflation data, though analysts see a surprise spike as unlikely.Dollar Rally Faces Limits Amid Fed Policy UncertaintyAccording to Jinshi Data, ING Bank’s Francesco Pesole said the U.S. dollar’s ability to extend its recent gains is constrained by current market pricing around Federal Reserve policy expectations.The dollar strengthened earlier this week as easing concerns about non-performing loans at regional banks improved market sentiment. However, Pesole warned that the greenback is unlikely to sustain momentum without a material change in rate-cut expectations.“Unless markets find a reason to rule out one of the three expected Fed rate cuts before March next year, it will be difficult to justify further gains in the dollar,” he said.Inflation Data Seen as Key CatalystPesole added that the most realistic driver of a repricing in rate expectations would be stronger-than-expected U.S. inflation data due on Friday.However, he noted that such an upside surprise is unlikely, suggesting that the dollar’s near-term trajectory could remain range-bound as traders await clearer signals on the Federal Reserve’s next policy move.