According to Danske Bank, the Fed could deliver at least three rate cuts by June 2026. The bank also sees a real chance of a more dovish Fed Chair taking office and an official preference for a weaker dollar. Danske’s 12-month outlook places EUR/USD at 1.22.
Danske previously expected the Fed to wait, but now anticipates the first cut as soon as December — even if the vote at the meeting turns out to be split.
Based on the bank’s updated scenario, the Fed would pause in January and then resume cutting rates in March and June.
Danske also draws attention to speculation that Kevin Hassett could step in as the next Chair of the Federal Reserve. If that happens, the bank argues, the policy outlook for 2026 would lean even further toward easier money.
Danske expects the White House to favor a softer dollar as a way to boost economic momentum.
The bank adds that declining US interest rates will reduce the cost of hedging dollar-based assets held by foreign investors. Hedge ratios were steady through the second half of 2025, but Danske expects them to rise in 2026 — a trend that could create an additional drag on the dollar.