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05:58 PMConflict keeps midstream compelling, integrateds see a pipeline of cash 04:38 PMIn Focus: Equity & Credit Update on AI CapEx 12:24 AMBarclays warns yen recovery likely temporary despite Tokyo's $35bn intervention 10:33 PMUS Rates - I won’t see you next time 08:06 PMGlobal Commodities: It’s Simple Math 05:22 PMGlobal FX: Yen intervention, re-assessing USD bearish view, central bank rundown 09:05 PMMorgan Stanley delays Fed cut call to 2027 (more info). Middle East risk drives dollar 09:02 PMEM Fixed Income: To every thing there is a season 11:51 AMTiff Macklem: Release of the Monetary Policy Report 09:05 AMChristina Papaconstantinou: Central banks and independence - a test for democracy 05:58 PMConflict keeps midstream compelling, integrateds see a pipeline of cash 04:38 PMIn Focus: Equity & Credit Update on AI CapEx 12:24 AMBarclays warns yen recovery likely temporary despite Tokyo's $35bn intervention 10:33 PMUS Rates - I won’t see you next time 08:06 PMGlobal Commodities: It’s Simple Math 05:22 PMGlobal FX: Yen intervention, re-assessing USD bearish view, central bank rundown 09:05 PMMorgan Stanley delays Fed cut call to 2027 (more info). Middle East risk drives dollar 09:02 PMEM Fixed Income: To every thing there is a season 11:51 AMTiff Macklem: Release of the Monetary Policy Report 09:05 AMChristina Papaconstantinou: Central banks and independence - a test for democracy

Bank of America

FX Outlook 2026: Structural Dollar Headwinds

LIVE5 December 2025USD bearish

Overview Forecasts Trades Currencies Scenarios Technicals Volatility EM Strategy Macro Quant

FX Research · Year-End 2026

5 December 2025USD bearish

Athanasios Vamvakidis · Claudio Piron

ACCURACY · 2023–2024

76.7%Hit rate

446 bpsAvg error

76.7%Direction

#1 of 8Rank

Sample: 30 forecasts·See methodology·View coverage: FX Outlook 2026: Structural Dollar Headwinds

ACCURACY · 2023–2024

Performance Snapshot

On Track

Off Track

Forecasts

Active Trades

+0.0%

Total P&L

0.0%

Avg Progress

DXY

100.2

Target: 93.5

EUR/USD

1.15

Target: 1.22

USD/JPY

157

Target: 147

USD Bias

BEARISH

DXY Forecast Path

Target 93.5

USD Sensitivity Analysis

US twin deficit deterioration

+1%pt widening in combined fiscal & current account deficit

-1.5 to 2% on USD TWI

European fiscal expansion

German €1tn infrastructure plan fully implemented

+3-4% on EUR/USD

Fed-ECB rate differential

-50bp narrowing in Fed-ECB spread

+1.5% on EUR/USD

EM portfolio inflows

+$50bn net EM portfolio inflows

-1 to 1.5% on USD vs EM basket

Oil price shock

+$20/bbl rise in Brent crude

+2% on NOK, CAD; -1% on INR, TRY

Top Currency Pairs

8 pairs

Pair	Direction	Status	Spot	Live	Dec 26	vs Spot	vs Live
TRY	Sell TRY	--	42.45	--	51	-16.8%	--
HUF	Buy HUF	--	332	--	292	+13.7%	--
PLN	Buy PLN	--	3.67	--	3.28	+11.9%	--
SEK	Buy SEK	--	9.54	--	8.65	+10.3%	--
NOK	Buy NOK	--	10.25	--	9.35	+9.6%	--
ZAR	Buy ZAR	--	17.31	--	15.8	+9.6%	--
AUD	Buy AUD	--	0.64	--	0.7	+9.4%	--
KRW	Buy KRW	--	1477	--	1370	+7.8%	--

Explore Report Sections

Forecasts

Exchange rate targets across G10 & EM

Trades

Active trade ideas with P&L tracking

Currencies

Deep-dive views per currency pair

Scenarios

Macro scenario analysis & stress tests

Technicals

Chart patterns, support & resistance

Volatility

FX volatility surface & carry

EM Strategy

Emerging market FX & rates

Macro Quant

Quantitative signals & models

Macro Trade Themes

Structural Dollar Headwinds

Twin deficits weigh on USD

The US twin deficit -- fiscal and current account -- continues to widen, creating structural headwinds for the dollar. Capital inflows that previously supported the USD are rotating toward Europe and Asia as relative growth differentials narrow and the Fed easing cycle progresses.

European Renaissance

EUR/NOK/SEK on fiscal stimulus

Europe's fiscal pivot, led by Germany's historic infrastructure program, is transforming the growth outlook for EUR-linked currencies. Scandinavian FX benefits from high beta to European growth, with NOK and SEK poised for significant appreciation as fiscal multipliers kick in through 2026.

EM High Beta

Long ZAR, BRL carry

High-yielding EM currencies with improving fundamentals offer attractive carry and capital appreciation potential. ZAR benefits from commodity terms of trade and fiscal improvement, while BRL carry remains compelling despite election-year volatility.

Asia Rebalancing

Long KRW, INR on trade flows

Asian currencies are undervalued relative to their trade surpluses and improving capital flows. KRW benefits from WGBI inclusion flows and tech cycle recovery, while INR is supported by RBI reserve accumulation slowing and portfolio inflows improving.

Yen Tactical Recovery

JPY from carry unwind

The yen is the most undervalued G10 currency on PPP and REER metrics. As the BoJ normalizes policy and global carry trades face headwinds from lower rate differentials, JPY is positioned for a tactical recovery. The carry unwind risk is asymmetric and could trigger sharp moves.

Compare with Other Firms

J.P. Morgan Goldman Sachs Morgan Stanley Barclays Deutsche Bank MUFG ING

FX BANK FORECAST · COVERAGE

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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from eight institutional desks. No promotion.