G10 FX mid-year: dollar reloaded

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G10 FX mid-year: dollar reloaded

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FX Viewpoint

Stay long USD into 3Q 25 June 2026

We extend our bullish USD view and forecasts into 3Q ’26 and stay short EUR/USD: our G10 FX Strategy

constructive view so far was predicated on the yawning gap between US growth Global

outperformance and rate differentials in early 2Q. This has narrowed, supporting USD,

but there is likely further to run, especially under our base case of three Fed rate hikes Table of Contents

this year. Positioning & sentiment have rapidly turned bullish dollar but still well within

G10 FX: USD exceptionalism strikes back 2

historical extremes, according to our metrics.

Special topic #1: USD/GPT: can AI drive FX? 6

Temporary vs. durable tailwinds Special topic #2: JPY fundamentals vs hedging 8

We revise down our YE ‘26 EURUSD forecast to 1.15 (previously 1.20), reflecting a reset flows

higher in the dollar range, but keeping a more neutral medium-term stance vs. forwards. Special topic #3: Summer carry caveats 10

Much depends on the extent to which US growth outperformance has been driven by FX volatility: midterms + reflation = vol support 12

temporary factors (tax refunds, wealth effects & the World Cup) vs. more durable FX flows: USD longs not crowded 14

tailwinds, especially AI. Meanwhile, lower energy prices will be a tailwind for the rest of Trade Recommendations G10 16

the world, although more likely in 2027 when oil so markets move to surplus. Research Analysts 21

No longer yen bears

We are no longer bearish JPY as structural outflows moderate and hedging trends begin G10MLI (UK)FX Strategy

to shift. While USD/JPY can remain elevated near term, we prefer expressing the view +1 646 855 9342

through short CHF/JPY as Japanese flow dynamics gradually improve. Adarsh Sinha