US Dollar to Weaken on Fed Rate Cuts, Pictet’s Paolini Forecasts; Dollar Index Seen Falling to 95 by 2026

Pictet Asset Management strategist Luca Paolini argues that a cooling economy could clear the path for additional Fed rate cuts, potentially triggering USD weakness next year. He points to a narrowing U.S. dollar valuation and a shrinking interest-rate differential, with expectations that the US economy will soften and inflation cools, while Europe and Japan may see firmer growth. This macro setup matters for crypto markets as liquidity regimes shift.

From a crypto-angle, a softer dollar and clearer policy expectations could support risk assets, with Bitcoin and other digital tokens often sensitive to macro shifts. The Dollar Index path toward 95 by end-2026 may serve as a liquidity barometer, guiding cross-asset flows and hedging strategies.

Overall, Paolini’s view highlights a macro environment where easing policy and a softer dollar could influence crypto valuations, reinforcing the need for disciplined, data-driven positioning and risk management.