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The dollar is set for a tactical dip before a larger bullish turn in 2026, according to Citi’s latest global FX strategy note.
Citi says it expects a 'hawkish cut' from the Federal Reserve this week, adding that markets have already priced the move.
The bank warns that "forward guidance – or lack thereof – could disappoint," a scenario that may shift January policy expectations in a more hawkish direction.
Such a shift could generate short-lived dollar weakness. Citi writes that if expectations reset in this way, "it could set up for a tactical USD weaker trade into next week's labor market data."
The bank stresses that this softness would be an opportunity rather than the start of a trend. Citi says "we are more interested in using tactical USD weakness to build longs for 2026," reiterating that it "retain[s] our bullish out-of-consensus USD call for next year."
Beyond the Fed, Citi highlights event risk across the remaining G10 central bank meetings this week.
It notes potential asymmetry for AUDUSD, USDCAD, and EURCHF, citing the combination of market pricing, leveraged positioning, and upcoming catalysts around the RBA, BoC, and SNB decisions.