Citigroup Research just told its clients to brace for a weaker greenback. The bank’s midyear 2026 outlook, published on July 15, projects the US dollar losing ground over the next 12 months as the Federal Reserve shifts gears from inflation hawk to rate cutter.
The call is straightforward: the DXY index, which measures the dollar against a basket of major currencies, is expected to slide from 101.82 in Q3 2026 to 99.96 by Q3 2027. That would put the world’s reserve currency below the psychologically important 100 level for the first time in this cycle.
What’s driving the bearish call
Three forces are converging to push the dollar lower, according to Citi’s analysis.
First, the Fed is expected to cut rates. Citi projects the Fed Funds rate landing at 3.25% by the end of 2026. The bank recently pushed back its expected timeline for the first cut from September to October 2026, but the direction of travel hasn’t changed.
