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08.28.2025

US current account put pressure on the dollar

Tactically neutral and strategically bearish on dollar

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Tactically, we maintain a neutral tactical stance on the dollar (NEUTRAL EUR/USD and DXY) as major near-term risks appear broadly balanced: fading trade tensions and eased Fed concerns are negative for the dollar, but US economic and labour market strength relative to the euro area supports the dollar (recent jobs data point to mild downside risks and potential short-term  softness in the dollar, however).

Strategically, we remain bearish on the dollar (LONG EUR/USD and SHORT DXY). By 2026, we anticipate macroeconomic and monetary policy divergences increasingly to favour the euro. Moreover, with the US current account deficit hovering near historic highs, we expect its gradual return toward the long-term norm to act as a structural catalyst for sustained dollar depreciation against FX peers. 


Valerio Ceoloni
Senior FX/EM Strategist





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