The U.S. dollar strengthened on Monday, but Bank of America (BofA) warned that further gains could be difficult, especially against major European currencies. Analysts pointed to bearish quantitative signals suggesting the dollar may face downside pressure following Federal Reserve Chair Jerome Powell’s dovish comments at the Jackson Hole Symposium.
The U.S. Dollar Index, which tracks the greenback against six major peers, rose 0.6% to 98.205. Yet BofA strategists noted that signals for a continued USD downtrend have broadened, with positioning analysis turning bearish against the euro, British pound, Swiss franc, and Swedish krona. This shift underscores growing doubts about the dollar’s resilience as markets adjust to a changing policy outlook.
Powell recently indicated that the Fed could consider monetary easing, citing that risks have shifted from inflationary concerns toward weakness in the labor market. “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said on August 22 at Jackson Hole.
The dovish shift weighed on the dollar and boosted sentiment for European currencies. BofA’s cross-asset regime-switching (CARS) model flagged bullish signals for the British pound, Swedish krona, and Norwegian krone.
The trend is not limited to Europe. Emerging market currencies such as the Mexican peso, Brazilian real, and South African rand are also expected to gain as dollar weakness broadens.
Overall, Powell’s remarks signaled a tilt toward monetary easing, pushing technical and positioning models to favor non-dollar assets. As markets digest these signals, the dollar’s trajectory is expected to remain cautious in the months ahead.
