40% svækkelse af US Dollar vil eliminere det amerikanske handelsbalanceunderskud

Make or break?

DXY reversed on the negative trend line and the 50 day some 2 weeks ago and is now approaching the “magical” 99 area again. Make or break?

Source: LSEG Workspace

Downside hedging

Everybody trying to hedge that dollar downside risk.

Source: Bloomberg/Nomura

The rates connections

The gap between the 10 year and the DXY has widened again.

Source: LSEG Workspace

Reserve currency status…

…usually lasts a century. Chart 2 shows American dominance since WW2.

Source: TS Lombard

Source: TS Lombard

A 40% USD decline would eliminate the trade deficit

Dollar strength has been the main driver of the US external deficit, tied to fiscal/monetary policy and foreign saving.

A full reversal of the dollar’s 40% real appreciation could bring the deficit to zero—but tariffs alone won’t get us there.

Tariffs might help if retaliation is muted and the dollar keeps falling (as DB expects), but higher prices and slower US growth would be the trade-off. (Saravelos)

Source: DB

Tracking

USD tracking ETF inflow momentum.

Source: JPM

More tracking

USD TWI has co-moved with the US’ share of global equity ETFs over longer periods…

Source: JPM

USD historically roughly 5-10% overvalued

Real effective exchange rate relative to previous ten year.

Source: BofA FX

More weakening

MS expects the USD to weaken by around 10% to end 2026…and see the EUR gaining the most vs the USD.