FX Hedging in Focus: May 2026

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FX Hedging in Focus: May 2026

Introduction

Welcome to the May 2026 edition of our FX Hedging in Focus publication! This slide deck provides insights into key market moves, our FX forecasts and key FX hedging

themes.

This year, the broad dollar has largely remained range-bound after its sharp selloff in the first half of 2025. Nevertheless, several currencies sit close to, or at their multi-year

highs against the greenback (e.g. CNH, BRL, AUD) and looking ahead, we expect dollar weakness to continue.

The start of the year saw risk sentiment buoyed by improving global growth prospects, a theme since dented by the US-Iran conflict and energy supply disruption in the

Middle East. The US’ status as net energy exporter initially saw the dollar appreciate but it has since largely reversed its gains made in March. We expect the Fed to lag other

developed market central banks this year by holding rates unchanged rather than hiking, while longer-term dollar valuations remain expensive, especially vs Asian FX.

In Europe, high exposure to the disrupted energy supply chains, including oil and natural gas, has resulted in downward revisions to growth and upward revisions to our

inflation forecasts. Nevertheless, from a euro perspective this less positive growth outlook is likely to be offset by the narrowing EU-US rate differential. We leave our year-

end EUR/USD forecast unchanged at 1.25.

We present two main FX themes for this quarter:

• Will the US-Iran conflict have lasting impact on USD dominance?

• How dynamic hedging can improve returns for corporate treasurers

More in the slide deck that follows.

The Deutsche Bank FX research team

Deutsche Bank FX Research ¦ May 2026 ¦ Charlie.hyams@db.com ¦ +44 (20) 758 653 3288 3

Research