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TD Securities strategists have revised their projections for the Federal Reserve (Fed) policy path, now forecasting no rate cuts in 2026. The bank expects the next Federal Open Market Committee (FOMC) decision to still be a rate cut rather than a hike, signaling a prolonged period of rate stability. This update reflects cautious optimism about the U.S. economy's resilience amid mixed inflation data and labor market strength. The revised outlook contrasts with earlier expectations of a more aggressive tightening cycle, highlighting the Fed's focus on balancing growth and inflation control.
For markets, this news reinforces the likelihood of a weaker USD in the near term, as delayed rate cuts reduce upward pressure on the dollar. Traders should monitor USD crosses like EUR/USD and USD/JPY for potential volatility, while bond yields may remain under downward pressure. The prolonged rate-hold scenario could also boost risk-on assets like equities and commodities, as investors anticipate a softer landing for the U.S. economy.
The key implications for traders include heightened sensitivity to U.S. inflation reports and FOMC statements in 2026. Central bank communication will be critical, as any deviation from the current path could trigger sharp market moves. Investors should also assess how this policy trajectory affects emerging markets, particularly in the Gulf, where USD strength impacts trade and debt servicing costs.
