The USD opened 2026 with a modest rebound, doing little to repair the damage from last year. The USD index edged up 0.24% on Friday to 98.48, after closing out 2025 with a 9.5% drop — its steepest annual decline since 2017, Reuters reports.

The slide was driven by mounting unease over President Donald Trump’s trade war, surging US debt, and concerns about the independence of the Federal Reserve. “This has been one of the worst years for USD performance in the history of freefloating exchange rates,” Deutsche Bank’s George Saravelos told the Financial Times.

A rebound from a deep hole: The USD hit its low point in September, down 15% against major currencies after Trump launched his sweeping April tariffs. It has since rebounded by 2.5%, as US recession fears eased, though the recovery has been capped by the Fed’s resumption of interest rate cuts, which kept the currency under pressure.

AI saves the day — for now: Capital inflows into US equities tied to the AI boom have provided short-term support, with further investments expected this year — keeping US growth ahead of Europe’s. The reopening of the US government and the impact of recently passed tax cuts could give growth — and the USD — a lift in 1Q, according to Brandywine Global. However, that boost is likely to fade later in the year.

… but the future still looks grim: Markets expect the Fed to deliver two or three quarter-point rate cuts in 2026, while other central banks are expected to hold or tighten policy. The Fed will introduce three rate cuts in 1H 2026, Moody’s Analytics’ Chief Economist Mark Zandi told CNBC, citing a weakening labor market, political pressure, and inflation uncertainty. FX strategists continue to forecast a weaker USD through the year, according to a Reuters survey.

Germany’s fiscal stimulus, policy support in China, and improving eurozone growth are expected to narrow the US growth premium. “When the rest of the world is starting to look better in terms of growth, that’s favorable for the [USD] to continue to weaken,” Amundi’s Paresh Upadhyaya told Reuters.

A pivotal month ahead: Markets are closely watching Trump’s choice for the next Fed chair, expected this month, ahead of Jerome Powell’s term ending in May. Powell has been under fire from Trump for not cutting rates more aggressively, but a successor more receptive to White House pressure could weigh further on the currency. Short-term direction will also hinge on a heavy run of US data next week, including Friday’s payrolls report.

TASI

10,549

+0.6% (YTD: +0.6%)

MSCI Tadawul 30

1,393

+0.4% (YTD: +0.4%)

NomuC

23,519

+1.0% (YTD: +1.0%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

4.5% repo

4.0% reverse repo

EGX30

41,829

+0.3% (YTD: +0.3%)

ADX

9,995

0.0% (YTD: 0.0%)

DFM

6,114

+1.1% (YTD: +1.1%)

S&P 500

6,858

+0.2% (YTD: +0.2%)

FTSE 100

9,951

+0.2% (YTD: +0.2%)

Euro Stoxx 50

5,850

+1.0% (YTD: +1.0%)

Brent crude

USD 60.75

-0.2%

Natural gas (Nymex)

USD 3.62

-1.8%

Gold

USD 4,330

-0.3%

BTC

USD 91,293

+1.1% (YTD: +4.2%)

Sukuk/bond market index

920.12

+0.1% (YTD: +0.1%)

S&P MENA Bond & Sukuk

151.69

-0.1% (YTD: -0.1%)

VIX (Volatility Index)

14.51

-2.9% (YTD: -2.9%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.6% on Thursday on turnover of SAR 1.6 bn. The index is up 0.6% YTD.

In the green: Alkhaleej TRNG (+7.6%), CGS (+6.6%) and Abo Moati (+6.5%).

In the red: Naseej (-2.4%), Gasco (-1.8%) and Nama Chemicals (-1.3%).

THE CLOSING BELL: NOMU-

The NomuC rose 1.0% on Thursday on turnover of SAR 17.0 mn. The index is up 1.0% YTD.

In the green: Molan (+24.5%), Bena (+7.9%) and Hamad Bin Saedan Real Estate (+7.8%).

In the red: Mayar (-9.6%), Horizon Educational (-8.2%) and Riyal (-7.4%).

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