What if the dollar has bottomed? – Money News
Investing.com — A current rebound in the U.S. dollar could mark the finish of its year-to-date slide, doubtlessly easing strain on European equities and resetting key assumptions throughout world markets.
The dollar, down round 10% from January highs, has not too long ago bounced following U.S. commerce agreements with Japan and the EU.
Barclays analysts say this transfer might replicate the early levels of a broader shift, significantly as speculative positioning towards the dollar appears to be like stretched and U.S. earnings and macro knowledge stay firm.
The rally in the euro, pushed more by capital flows than rate of interest differentials, has been a drag on European earnings, particularly for exporters.
Barclays’ FX strategists count on the euro to weaken steadily, forecasting EUR/USD to fall towards 1.13. That shift would reverse some of the eurozone’s year-to-date “exorbitant benefit” from dollar weak point, which had exacerbated the influence of deteriorating phrases of commerce attributable to tariffs.
European shares have lagged U.S. friends partly attributable to this FX dynamic. Barclays says the stronger euro has hit company earnings tougher than tariffs, contributing to a wave of EPS downgrades in export-heavy sectors. But a dollar turnaround could offer some aid, with the potential to put a ground underneath European earnings estimates.
Medium-term dangers stay. Concerns round Federal Reserve independence and potential price convergence in 2026, particularly if German or EU growth surprises to the upside — might restrict sustained dollar power.
Still, Barclays concludes that FX is no longer a one-way guess.
If the dollar has in truth bottomed, it could mark a significant shift in world equity drivers, the brokerage mentioned.
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