Reasoning
The US Dollar Index (DXY) is currently at 101.20. The Federal Reserve's target range is 3.50 to 3.75 percent, and the median expectation for the year end 2026 funds rate is 3.8 percent, with several FOMC participants projecting rates above the current target range. This suggests a hawkish lean from the Fed, which would typically support a stronger dollar. However, the index needs to close above 102 for at least 20 consecutive trading days in the latter half of 2026. Given the current level and the policy outlook, achieving this sustained move above 102 requires further dollar appreciation, which is not guaranteed even with a hawkish Fed given other global economic factors.Key uncertainty
The trajectory of global economic growth and inflation outside the US, which could lead to divergent monetary policies and impact currency valuations.