Bank of America Global Research extends its USD bullish bias into Q3.

"We extend our bullish USD view and forecasts into 3Q '26. Having recommended selling EUR/USD in May, we expect a breakout from the long-held range to extend to 1.12 in 3Q '26. Our constructive USD view was predicated on the yawning gap between US growth outperformance and rate differentials in early 2Q. This has narrowed, supporting USD, but there is likely further to run, especially under our base case of three Fed rate hikes this year," BofA notes.

"Our rates team forecast ~30bp widening of the EUR-USD 2y differential by 3Q '26, which based on historical betas would imply ~1.2% lower EUR/USD, consistent with our new forecast but recognising downside risks as FX is prone to overshoot. We stay short EUR/USD via put spreads," BofA adds.