The US Dollar (USD) is currently the best performing G10 currency both on a one-month view and in the month to date, Rabobank's FX analyst Jane Foley reports.

EUR/USD short squeeze boosts dollar temporarily

"It is the third best performer amongst its peers in the half year to date having been only just pipped to the post by the NOK and the SEK in this period. Despite this very respectable performance, the greenback remains the weakest performing G10 currency in the year to date on the back of its substantial falls early in the year. This weakness has left a clear legacy."

"The debate about whether the USD has lost its safe haven value continues to be aired and the Bloomberg survey results continue to point to further USD weakness in the coming months, with the consensus pointing to a move to EUR/USD1.21 in Q3 2026. In line with our view the USD has recently benefitted from a short squeeze, and we maintain our forecast of EUR/USD1.16 on a 1-to-3-month view."

"That said, we have been forecasting a move to EUR/USD1.20 in Q2 to roughly coincide with the end of Powell’s term as Fed chair, on the assumption that concerns over Fed independence will undermine the greenback in that period. However, there is a lot of Fed easing already priced into the USD and we will be reviewing this forecast once some of the delayed US economic data are released and a more up to date picture of the US economy can be formed."