Synopsis:

Bank of America continues to hold a strategic bearish view on the USD, but flags near-term upside risks as that bearish stance has become a consensus position. With US data showing resilience and trade/fiscal pessimism already priced in, the dollar could rebound temporarily, especially if US growth reaccelerates.

Key Points:

• Crowded positioning: USD bearishness has become a consensus trade, increasing the risk of short-covering or tactical reversals.

• Data resilience: The most plausible upside risk comes from ongoing strength or reacceleration in US macro data, even if short-lived.

• Tariffs & fiscal risk priced in: Negative sentiment from trade war and fiscal dysfunction is now well embedded in pricing, limiting additional downside.

• Longer-term bearish outlook unchanged: BofA still expects the USD to act as the relief valve for US policy uncertainty and trade-induced dislocations over time.

• Trading stance: Any near-term USD strength is viewed as a selling opportunity, barring a material policy or macro shift.

Conclusion:

While BofA remains strategically bearish on the dollar due to structural imbalances and trade headwinds, they caution that short-term USD upside is plausible given consensus positioning and solid US data. The USD may still weaken in the long run, but tactical rallies should not be ignored in the near term.