BBH’s Elias Haddad says the US Dollar Index (DXY) may move above the top of its 96.00–100.00 range. He links this to resilient US economic activity, a positive net energy balance, and a more restrictive Federal Reserve.
The Atlanta Fed GDPNow model estimates annualised real GDP growth of 4.0% in Q2, compared with 2.0% in Q1. The note also points to strong foreign demand for US-dollar assets as support for the dollar.
Foreign Demand For Us Securities
US Treasury International Capital (TIC) data show that, in the 12 months to March, foreigners accumulated $1553bn of long-term US securities. This was down from a record $1680bn in January and was the lowest level since October 2025.
Over the same 12 months, the US ran a -$700bn trade deficit. The $1553bn total in long-term security purchases is larger than that trade deficit figure.
The report says foreign demand for US long-term securities could weaken if the US trade deficit narrows. With fewer dollars flowing abroad, there would be less need for those funds to be recycled into US securities, which may weigh on the USD over time.
The US Dollar Index appears poised to overshoot the top of its long-standing 100.00 range in the coming weeks. A resilient American economy is backing a more restrictive Federal Reserve, especially as April 2026 inflation data came in hotter than expected at 3.1%, pushing any rate cut expectations further out. This environment makes bullish derivative plays on the dollar, like buying call options on the DXY, a logical strategy.
Growth Energy And Fed Tightness
This strength is supported by solid underlying growth and the country’s positive net energy balance. The current Atlanta Fed GDPNow model is tracking annualized growth for Q2 2026 at a healthy 2.8%, which reinforces the case for continued dollar resilience. We saw a similar dynamic in 2025 when strong growth forecasts supported a more restrictive Fed policy, benefiting the dollar.
Underlying demand for the dollar from foreign investors also remains a powerful, supportive force. Looking back, we saw foreigners accumulate over $1.5 trillion in US securities in the twelve months to March 2025, which easily covered the trade deficit. The most recent Treasury data through February 2026 shows this trend persisting, providing a strong fundamental bid for the dollar on any dips.
Still, we are mindful that a narrowing US trade deficit could be a structural drag on the dollar over time. Fewer dollars flowing overseas reduces the need for recycling them back into US securities. For traders, this long-term factor suggests that any bullish dollar positions should be tactical, perhaps using options with expirations in the next one to two months to capture the expected near-term breakout.
