The US dollar’s recent surge is encountering growing skepticism from major financial institutions, despite the currency’s strong performance in recent weeks.
While market momentum has reinforced the consensus for further greenback strength, strategists at Morgan Stanley and Credit Agricole are signaling that the rally may be running out of steam.
The divergence in outlook highlights a critical juncture for FX traders.
The dollar has been propelled by intensifying expectations that the Federal Reserve will need to raise interest rates rather than cut them, a shift that has driven the currency toward its largest monthly gain in nearly a year.
However, the warning from these banks suggests that the repricing of rate expectations may be nearing completion, leaving the currency vulnerable to a pullback.
This caution comes against a backdrop of shifting global reserve management strategies.