Greetings from Copenhagen.

Despite multiple positioning and macro indicators starting to greenlight a path higher for the USD, there is simply not a single news story or narrative that supports it yet. With the Fed now actively exploring the dovish route rhetorically, and Trump throwing around—so far anonymous—names for the Fed chair early ahead of the chair shift in 2026, the USD is probably back to weakening on a trend basis. The question is: how much further can we go?

Debasement risks are back in play, as the ongoing Fed debacle weakens the credibility of the Fed—becoming increasingly politicized—and, more importantly, undermines confidence in the USD system. We are back to an Erdoganomics-lite regime shadowing the FX market at the moment.

The USD has failed to stay above key levels over the past month, and while there are still reasons to believe that the weak USD story is oversold, we probably have to wait until we see actual “improvements” in inflation, growth, and the like before the trend turns—especially given the story overnight that Hong Kong is a buyer of HKD for the first time since 2023, which doesn’t help the USD at all.

Chart 1a: The USD has failed to hold key support levels over the past month