Dollar Index Eyes Near-2026 High as Short-Term Outlook Holds Strong

Societe Generale's Kit Juckes believes that while the US Dollar's long-term outlook is weakening due to US politics and changing global savings patterns, the short-term picture remains favorable. The dollar has been supported by strong US data and higher inflation, which could push the Dollar Index toward its 2026 highs and drive EUR/USD to fresh lows.

The longer-term outlook for the dollar is deteriorating due to factors such as midterm elections that may make it difficult for President Trump to maintain accommodative fiscal policies. The world's major savings economies are saving less than they once did, while the US has had to pay more to attract investment. However, in the short term, energy importers remain under pressure, with the yen yet to benefit from tighter monetary policy and the euro unable to gain support from upgrades to growth expectations.

The US data calendar is packed with key releases, including JOLTS, ADP employment, personal income and spending, trade, ISM surveys, and labor market data. Higher inflation and resilient real-economy data could propel the Dollar Index to a near-2026 high of 0.7% or push EUR/USD to a new low of 0.5%.