Core Viewpoint - Major Wall Street banks are bearish on the US dollar, predicting a decline as the Federal Reserve continues its easing cycle, with Morgan Stanley forecasting a 5% drop in the first half of next year [1][2]. Group 1: Predictions on the US Dollar - Deutsche Bank, Morgan Stanley, and Goldman Sachs anticipate a weakening of the dollar in 2026 due to the Fed's continued easing while other central banks maintain or raise rates [2]. - The Bloomberg consensus predicts a 3% decline in the dollar index by the end of 2026 [2]. - Morgan Stanley's David Adams states that the dollar has ample room for further depreciation, expecting a 5% drop in the first half of next year [2][3]. Group 2: Economic Implications - A weaker dollar is expected to have a chain reaction on the US economy, increasing import costs, enhancing the value of overseas profits for companies, and boosting exports [4]. - The shift of investor funds to emerging markets for higher yields could extend the rally in these markets, with significant returns recorded in carry trades since 2009 [4]. Group 3: Market Sentiment and Currency Trends - Analysts note that the dollar tends to depreciate when global economic performance is strong, with G10 currencies like the Canadian and Australian dollars benefiting from better-than-expected data [5]. - Some institutions, like Citigroup and Standard Chartered, maintain a bullish outlook on the dollar, citing the strength of the US economy driven by AI and potential international capital inflows [5]. Group 4: Federal Reserve's Stance - The Federal Reserve has raised its growth forecast for 2026 while announcing a 25 basis point rate cut, indicating a cautious approach to future monetary policy [6]. - Market expectations include two more 25 basis point cuts next year, with a focus on the new Fed chair's potential influence on future rate decisions [6].