Near Term Dollar Outlook
BBH is described as neutral on the dollar in the near cycle. It expects DXY to stay within a 96.00–100.00 range, linked to interest rate gaps between the US and other major economies. Over the longer term, BBH maintains a bearish view on the dollar. The reasons listed are lower confidence in US trade and security policy, weaker perceptions of US fiscal credibility, and the politicisation of the Federal Reserve. We are seeing improved global risk sentiment as markets price in a resolution to the Iran tensions that flared up late in 2025. With the Dollar Index (DXY) consolidating around 98.50, traders are showing more confidence. This is reflected in the S&P 500 recovering nearly 5% this quarter. Despite the calm, we see risks skewed towards a stronger dollar in the near term if financial stress returns. History, like the market shocks we saw back in 2022, shows a flight to dollar safety is rapid and unforgiving. Therefore, holding some cheap, out-of-the-money call options on the dollar for the next 30-60 days could be a prudent hedge against a sudden flare-up.Range Trading Strategies
Cyclically, we expect the DXY to remain anchored within a 96.00-100.00 range for the coming months. With US CPI data from February holding at a stubborn 2.8%, the Fed is unlikely to cut rates aggressively ahead of the European Central Bank, keeping rate differentials stable. This makes strategies like selling iron condors on currency futures attractive, as they profit from low volatility. Structurally, our view remains bearish on the dollar due to fading confidence in US policy and worsening fiscal credibility. The Congressional Budget Office’s projections from January showed the debt-to-GDP ratio on a path to exceed 120% by the end of the decade, weighing on long-term sentiment. Traders with a horizon beyond one year might consider gradually building positions in long-dated DXY put options. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
