US Dollar: Rally pause seen as temporary – Societe Generale

Societe Generale strategists Kit Juckes and Olivier Korber argue that Dollar strength remains underpinned by robust US growth, sticky inflation and a favourable terms of trade shock versus Europe and Asia. They note the Dollar has already risen against most majors and expect USD strength to persist through the second half of 2026, despite a recent pause.

King Dollar narrative remains intact

"Our 2026 FX Outlook ‘King Dollar will return’ had a cover picture of ‘Growth’ fighting ‘The Fed’ for a chest full of dollars."

"The US economy was already out-performing European and Asian competition, but higher oil prices brought with them a terms of trade shock – positive for the US, negative for Europe and Asia."

"As a result, the mood has changed and the dollar has risen against two thirds of the other major currencies, and all but two of the G10 ones (resource-rich AUD and NOK)."

"We expect USD strength to persist through the second half of the year."

"Of the main drivers of US growth (oil, AI capex and fiscal support), only the oil price is retreating."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)