USD Faces Trust Crisis! Wall Street Strategists Say Its Long-Term Trend is Softening
Our sources at Zhongtong Caifeng APP have learned that despite the USD recording its largest monthly gain in three years in July, Wall Street forex strategists are still firmly bearish on the dollar, believing its rebound momentum is difficult to sustain.
In July, the US dollar index (DXY) rose 3.2%, ending a string of consecutive months of decline. This is also the strongest performance since 2021. The market has gradually adapted to Trump's tariff policy, and the US second-quarter GDP data showed stability, which has strengthened the dollar's short-term trend and reversed its previous two-digit decline.
However, in the eyes of forex market participants, the dollar's long-term trend is still pointing towards softening. The latest job data, concerns over the Fed's independence, and Trump's dismissal of US Labor Statistics Bureau chief Erika McEntarfer have all sparked concerns about the reliability of US economic data.
Kamakshya Trivedi, head of forex and emerging markets at Goldman Sachs, said in a report: "Our USD view is almost entirely wrong this week, but the significant revision to job growth should change the market's interpretation of tariff impacts." Last Friday, data showed that non-farm employment growth for May and June was revised downward by 258,000 people, far exceeding market expectations.
The next key time point will be the September 5th non-farm employment report. Trivedi pointed out that not only is the data result itself worth paying attention to, but also the expected deviation and changes in data collection methods are even more important. As initial response rates decline and the Labor Statistics Bureau undergoes layoffs, external doubts about this institution's data have been high. Now, Trump will appoint a new chief, widely seen as his loyal supporter, which could raise concerns that next month's job data may be manipulated.
Although a stellar job report might briefly boost the dollar before its release, investors' doubts about data credibility are driving them to reduce their USD assets in the medium and long term.
Meanwhile, Fed Chairman Powell's recent resignation has also sparked market attention. Trump has the opportunity to re-nominate, with National Economic Council Director Hassett or former Fed Vice Chair Yellen being possible candidates.
Daniel Tobon, a forex strategist at Citi, said: "Although this nomination may not be the next Fed Chairman, if Hassett or Yellen takes over, the market may quickly interpret it as the Fed leaning towards more aggressive rate cuts." He also emphasized that the market has yet to fully price in the impact of Powell's resignation and reiterated his bearish view on the dollar, predicting the euro against the USD could reach 1.20. The current euro exchange rate is 1 EUR = 1.16 USD.
Barclays' head of forex strategy, Themistoklis Fiotakis, also believes that Powell's resignation "has opened up a new window for short-term dollar softness," but he does not expect the dollar to experience excessive devaluation by 2025.
Regardless of whether it's Goldman Sachs or Barclays, both institutions tend to favor a bullish view on USDJPY, believing that in today's uncertain environment, the yen is becoming increasingly attractive as a safe-haven currency.