FICC Focus Dollar Bear Views Hold and Recent Rally Already Over: FX Moment
Aug 6, 2025
Elias Haddad, Senior Market Strategist at Brown Brothers Harriman, discusses the current state of the U.S. dollar and its implications for the economy. He highlights the recent weakness in non-farm payrolls and the unexpected firing of the Bureau of Labor Statistics Chief as key factors sustaining a bearish dollar narrative. They explore the Federal Reserve's shifting interest rate stance and its impact on the dollar compared to other currencies. Additionally, Haddad examines the euro's potential growth against the dollar, suggesting a bullish outlook.
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Emerging US Economy Weakness
- The weak July Non-Farm Payrolls suggest cracks in the US economy are emerging.
- This points to a possible stagflation environment, which is negative for the US dollar.
Dollar Undervalued Despite Yields
- The dollar should trade higher based on interest rate differentials but isn't, indicating lost confidence in US policymaking.
- This gap creates a cyclically bearish outlook for the US dollar going forward.
Fed Cuts to Weaken Dollar
- Fed rate cuts expected to be aggressive once begun, which will be very bearish for the dollar in 2026.
- Other major central banks are close to ending easing, worsening the US yield differential and pressure on the dollar.