Financial institution of America flags greenback longs as crowded, eyes world inflation considerations

Financial institution of America (BofA) analysts highlighted a shift in market sentiment, figuring out lengthy U.S. greenback positions as probably the most crowded commerce, and now a big headwind for the forex. This attitude aligns with BofA’s latest studies on the U.S. greenback, emphasizing the stark distinction between present market positions and historic developments.

The analysts’ findings point out a rising apprehension amongst market members concerning world inflation, notably with a re-acceleration anticipated by 2025. Euro Space inflation expectations are notably seen, underscoring the broader considerations about inflationary pressures.

Moreover, whereas rising market (EM) buyers appear to have discounted the worst-case situations associated to tariffs, the uptick in sentiment is perceived as tentative. The cautious stance of EM buyers displays the uncertainty and challenges within the world commerce setting.

BofA’s evaluation means that the heavy positioning in favor of the U.S. greenback might be problematic. The report, dated January 14, 2025, factors out that the extent of USD lengthy positions is outstanding not solely in a historic context but in addition when in comparison with the previous yr’s developments.

Moreover, the discrepancy between conviction and positioning is obvious, as solely a fifth of respondents think about lengthy USD their highest conviction commerce. That is regardless of 42% of these surveyed anticipating the height of 10-year U.S. Treasury yields to exceed 5%, as revealed in a separate exhibit from the financial institution’s analysis.

This text was generated with the help of AI and reviewed by an editor. For extra data see our T&C.