Weak USD becomes new normal as Greenback continues slide against benchmarks

The sliding US dollar has continued to impact forex trading pairs into the new year, but what does it mean for the trading landscape in 2026? 

Recent signs of weakness in both USD/CNY and USD/CAD trading pairs in recent days have shown that ongoing depreciation trends involving the greenback appear to be continuing into the new year, with many different geopolitical factors entering the fray to compound the dollar’s challenges. 

Given that President Trump, now entering the second year of his second term in the White House, has been a vocal supporter of a weaker dollar, citing tourism and export benefits as key benefits that come with currency depreciation. 

It’s for this reason that the 4.6% decline in USD/CNY since the president took office in January 2025 should come as no surprise. But the myriad factors that are contributing to drive the dollar lower will be worth tracking for investors as a weaker USD environment becomes the new normal in the forex landscape. 

To close out 2025, the yuan reached the 7 per dollar level in onshore markets for the first time since 2023, as the Chinese government’s own economic stimulus measures drive a sustained period of currency appreciation for the Asian trade powerhouse. 

Given that the Trump administration’s announcement of reciprocal tariffs in April 2025 brought a sustained period of economic uncertainty that carried far-reaching implications for historical trading partners like China, the rate of the dollar’s depreciation has been accelerated by Trump’s bold handling of geopolitics. 

Fed speculation pushes USD/CAD lower

The uncertain outlook for the greenback has been met by a resurgence in the performance of the renminibi, but the uneven impact of Trump’s trade tariffs and pressuring of the Federal Reserve to lower tariffs can be more clearly seen in USD/CAD. 

Another key trading partner, the relationship between the United States and Canada has already seen a series of trend reversals occur throughout Trump’s second term, with an initial 5% decline over three months surrounding tariff announcements arriving closely followed by a brief period of recovery. 

More recently, speculation surrounding President Trump’s new nominee for Fed chair in May 2026 appears to be pushing bets on upcoming interest rate cuts higher, which will have a depreciatory impact on the dollar. 

With expectations high regarding two more interest rate cuts arriving in 2026, it’s likely that the dollar will continue its ongoing slide against international peers long into the new year. 

More geopolitical complications for USD/CAD arrived to kick off the new year as Russian oil facilities were reportedly struck by Ukrainian drones, while the US Treasury Department announced sanctions on oil traders who were accused of helping Venezuelan President Maduro evade restrictions. 

Canada’s status as the largest crude oil exporter to the United States places USD/CAD in exceptionally volatile territory as geopolitical tensions continue to grow, making it a key pair to track for forex traders. 

Europe struggles to make ground

Some benchmarks appear to be less decisive for the greenback, and recent challenges in the Eurozone have caused some strengthening in USD/EUR at the beginning of 2026, raising the possibility of a trend reversal after a decline of more than 12% in the pair. 

Europe’s own manufacturing concerns, in which activity contracted beyond expectations throughout the Eurozone in December, pushed the euro lower against the dollar as US PMI figures are largely expected to reveal a sizeable expansion throughout the sector as President Trump’s protectionist policies bring more production to the United States. 

Given that expectations for the future of the dollar rely heavily on the state of interest rates and the Federal Reserve’s monetary policy, we can expect USD/EUR to resume its steady depreciation into the new year, even as upcoming rate cuts appear to be somewhat factored into the greenback when looking at the long-term forex landscape. 

Opportunities in FX ahead

Given that investor flows are largely tied to the rate of borrowing when it comes to currency investing, expectations for more rate cuts will certainly carry a depreciatory impact on the dollar, but for forex traders, the increased volatility between the United States and its major trading partners will uncover plenty of fresh opportunities in the age of the new normal. 

Looking ahead, President Trump’s involvement in both the conflict in Ukraine and rising tensions with Venezuela could have a profound impact on USD/CAD, with the rising price of oil likely to trigger more pronounced declines in the trading pair. 

Likewise, the polarized monetary outlook between the Chinese government and the Trump administration could see a continuation of the weakening USD/CNY. 

In Europe, however, the Eurozone’s own productivity challenges are forging a new area of contention in USD/EUR. 

For forex traders looking to trade in volatility, 2026 is set to be a year that will uncover plenty of fresh trading opportunities. However, the geopolitical factors driving this uncertainty are becoming increasingly nuanced, meaning that it could shape up to be a year of greater risks for those seeking to anticipate future movements.