The Federal Reserve is widely expected to hold its benchmark rate at 3.50% to 3.75% for a fifth straight meeting when Chair Kevin Warsh delivers the Federal Open Market Committee’s (FOMC) decision on July 29, but TD Securities says the U.S. dollar could weaken anyway as traders overprice the odds of a surprise hike.
Key Takeaways
The Fed’s July 29 FOMC decision under Chair Kevin Warsh is expected to hold rates at 3.50% to 3.75%.TD Securities says CME FedWatch’s 95% to 98% no-change odds still overprice hike risk tied to Iran tensions.TD Securities forecasts a 2% dollar decline in the back half of 2026 if the Fed holds as expected.Mike McCluskey, co-founder of TX and a former Fidelity executive, described the setup bluntly, stating:
“The market has been patient for six weeks. This is the week it finds out if that patience was warranted.”
He added that a hold paired with hawkish language, or a surprise hike, “and the $58,000 to $60,000 range comes back into view quickly.”
TD Securities Sees a Mispriced Hike RiskThe stakes of that mispricing are unusually high by historical standards. If current hike-risk pricing persists all the way into Wednesday’s decision, TD Securities noted it would represent one of the largest deviations between market pricing and the Fed’s actual policy action in the past decade, a gap the bank expects to close once Warsh confirms the hold.
Beyond Wednesday, TD Securities is calling for the dollar to weaken further over time, forecasting roughly a 2% decline in the second half of 2026 as the Fed stays on an extended hold rather than pivoting toward tightening. That outlook assumes the central bank needs firmer evidence of sustained inflation and labor-market strength before it would even consider a hike, a bar the bank does not expect to be cleared soon.
A hold decision carries direct implications for crypto markets heading into the rest of the week. The Fed’s meeting arrives just before the release of the core personal consumption expenditures (PCE) price index and second-quarter GDP data on July 30, both of which could reinforce or undercut whatever tone Warsh strikes at his 2:30 p.m. ET press conference.
McCluskey laid out the bullish case for bitcoin if the numbers line up, i.e. a hold paired with a dovish tone, strong artificial intelligence capital expenditure guidance, and constructive PCE data could turn the $65,000 level into a genuine attempt at $68,000 to $70,000 through August. A hawkish surprise, by contrast, risks dragging prices back toward the $58,000 to $60,000 zone he flagged.
The dollar call from TD Securities adds another variable to that setup. A weakening dollar has historically coincided with periods of relative strength for bitcoin and other risk assets, since a softer greenback tends to ease financial conditions globally even when the Fed itself stays on hold.
