Last Updated on September 28, 2026 by Deon
The outlook for the US Dollar is tied tightly to what people expect the Federal Reserve to do with interest rates. TD Securities says the Fed might lift rates again in October because inflation is still above its target and the economy is still showing signs of staying strong.
Economists Oscar Munoz and Eli Nir think the central bank will keep a stance with more rate hikes possibly in October and January. Still the next inflation and employment data will be key in deciding when and how much the Fed will change policy.
TD Securities
Fed Rate Hike Expectations Rise
People now think the Federal Reserve will tighten policy more because policymakers are still worried about inflation that keeps on staying high.
TD Securities expects the Fed to raise rates more – once in October and again in January. This view comes from inflation pressure, a sturdy economy and the fact that the US labor market looks steadier.
Recent remarks from Fed officials also back the idea of policy. They have voiced worries that progress toward the Fed’s inflation target is moving slowly.
Higher interest rates usually help the US Dollar because they raise the returns on assets priced in dollars.. The real performance of the US Dollar also depends on what markets expect, on economic numbers and on the policies of other central banks.
Inflation Data in Focus
Inflation will keep being the factor that shapes the Federal Reserve’s next moves.
TD Securities expects the next Personal Consumption Expenditures or PCE report to show inflation numbers that were seen in August.
The bank predicts headline PCE inflation will go up 0.38% from the month and 3.8% from a year ago. Core PCE inflation, which leaves out food and energy is expected to climb 0.32% each month and 3.4% over the year.
These numbers would show that inflation is still above the Federal Reserve’s 2% target. Markets will also look at revisions to inflation data. If earlier inflation numbers are revised less than expected investors might think price pressure is staying stronger.
Inflation that is stronger than people expect could boost hopes for rate hikes, which might help the US Dollar. On the hand softer inflation could ease the pressure on the Fed to tighten policy.
US Spending Remains Resilient
How much people spend is another part of the economic picture. TD Securities expects U.S. Consumer spending to grow 0.9% with spending up 0.5%. Solid retail sales help back this estimate.
Strong consumer demand can keep the economy growing.. If demand stays high while inflation is still high the Fed may have less reason to loosen policy.
In the currency markets the mix of spending and steady inflation could make people expect higher U.S. Interest rates.
Still a stronger economy does not automatically mean the Fed will raise rates again. The Fed will have to look at data together with its goals for jobs and inflation.
Jobs Data Could Change the Outlook
The U.S. Labor market will be another focus for investors.
TD Securities expects the September Nonfarm Payrolls report to show job growth and a higher unemployment rate. That could give policymakers a confusing picture.
If the employment report is weaker people might expect new rate hikes especially if it signals the economy is slowing.
On the side signs of stronger hiring or a still‑resilient labor market could back the case for tighter policy.
The link between jobs and inflation will stay the heart of the Fed’s decision making.
Investors will also keep an eye on Fed officials’ comments for hints about the bank’s policy direction.
What It Means for the US Dollar
The US Dollar could keep being sensitive to releases as traders change their expectations for rates.
If inflation stays high and jobs stay strong people may expect Fed tightening, which could help the US Dollar against the big currencies.
Weaker economic data could challenge hopes for more rate hikes.
The US Dollar’s direction will also depend on Treasury yields, global risk mood and expectations of policy outside the United States.
Thus traders should not rely on rate expectations when looking at the next move of the US Dollar.
Key Events to Watch
A things could affect the US Dollar in the next days:
PCE inflation: The report could give new evidence about how steady price pressure is.
U.S. Employment data: Payrolls and unemployment numbers could affect what people think about the October Fed meeting.
Fed speeches: What policymakers say could reveal whether more tightening is likely.
Treasury yields: Moves in bond yields could change demand, for assets priced in dollars.
These events may cause price swings in currency pairs, such as EUR/USD, GBP/USD and USD/JPY.
Conclusion
The outlook, for the US Dollar is still shaped by the expectation that the Federal Reserve will raise rates again. TD Securities expects the Federal Reserve to raise rates in October and January because inflation stays high and economic activity remains strong.
However this outlook is not certain. New PCE inflation numbers and September employment data could shift market expectations a lot.
For traders the main point is to watch economic reports to see if they back more tightening or show that the Federal Reserve may need to change its plan.
