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Investing.com - The US dollar’s broad downtrend has begun to reverse course in July after showing resilience in the labor market, according to Bank of America analysts.
The reversal signs emerged following strong June US payrolls data, with USD/JPY becoming the first USD/G10 pair to re-enter a USD uptrend since March, as noted in BofA’s July 14, 2025 report. The dollar has experienced one of its worst starts to the year against the euro in 2025, with indicators suggesting high trend reversal risk for EUR/USD.
Markets briefly entered a "sell US" regime in April when the dollar, US equity, and US Treasury simultaneously sold off. However, recent macro developments have reduced the structurally bearish case for the US dollar, according to BofA’s July 10, 2025 report.
Tariff letters issued recently contained similar rates as in April, but US asset prices are no longer reacting as strongly to these headlines. The US has successfully established trade frameworks with the UK, Vietnam, and China, with the Treasury collecting $22 billion and $26 billion in tariffs during May and June respectively.
With US equity outperforming the rest of the world in Q2 and the USD regaining its negative correlation with US equity, global investors now have less incentive to increase the FX hedge ratio for USD-denominated assets, an observation supported by plateaued back-end risk reversal for USD puts and investor responses from the latest Global Fund Manager Survey in July.
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