USD: BBH sees ongoing upside risk amid conflict-fueled market conditions

BBH’s Perspective: Dollar Outlook Amid Global Risk Shifts

Elias Haddad from Brown Brothers Harriman observes that international risk appetite has strengthened, as investors anticipate a possible resolution to tensions involving Iran. The US Dollar Index (DXY) is currently holding below the 100.00 mark. Despite this improvement, Haddad cautions that demand for dollar liquidity during turbulent periods continues to push USD risk upward in the short term. BBH’s stance remains neutral on the dollar within a 96.00–100.00 DXY range for cyclical movements, while maintaining a longer-term bearish outlook.

Short-Term Dollar Risks Remain Elevated

Global equities and bond markets are experiencing gains, while Brent crude oil is trading close to $100 per barrel. The DXY persists below 100.00. The direction of Iran’s reaction to the US’s efforts to reduce tensions will ultimately determine whether the worst of market anxiety has passed or is yet to come.

As uncertainty continues, the US dollar remains vulnerable to upward pressure, primarily due to heightened demand for dollar funding during times of financial stress.

Cyclical and Structural Dollar Views

From a cyclical perspective, BBH expects the dollar to stay within the 96.00–100.00 range, reflecting interest rate differences between the US and other leading economies.

On a structural level, BBH’s outlook for the dollar is negative. This is attributed to declining trust in US trade and security policies, deteriorating fiscal reliability, and increasing political influence over the Federal Reserve.

This article was produced with assistance from an AI tool and reviewed by editorial staff.