Bank of America (BoA) maintains a negative outlook on the US dollar and expects EUR/USD to rise to 1.22 by the end of 2026 amid broader underperformance of US assets. The bank also forecasts a further advance of the pair to 1.25 by the end of 2027.
The dollar managed to regain some ground as immediate debasement fears eased; however, BoA notes that even stronger-than-expected January labor market data failed to provide meaningful support for the US currency. According to the bank’s analysts, this aligns with a pattern seen throughout 2026, where solid US macroeconomic data has generally not translated into dollar strength.
While BoA does not anticipate a broad sell-off in US assets, it does see scope for increased hedging of US exposure, a factor that is likely to continue weighing on the dollar.
The bank also believes that an improving global economic outlook will encourage investment funds to reduce the relative share of US assets in their portfolios.
An additional negative factor for the dollar, according to BoA, is its continued overvaluation by an estimated 15–20% on a global basis, which preserves the potential for further weakening of the US currency.
