Barclays
FX Outlook 2026: Navigating the Turn
Performance Snapshot
DXY
100.2
Target: 95
EUR/USD
1.15
Target: 1.21
USD/JPY
157
Target: 149
USD Bias
BEARISH
DXY Forecast Path
USD Sensitivity Analysis
Top Currency Pairs
| Pair | Direction | Status | Spot | Live | Trend | Dec 26 | vs Spot | vs Live |
|---|---|---|---|---|---|---|---|---|
| TRY | Sell TRY | -- | 42.45 | -- | 51.5 | -17.6% | -- | |
| HUF | Buy HUF | -- | 332 | -- | 300 | +10.7% | -- | |
| PLN | Buy PLN | -- | 3.67 | -- | 3.35 | +9.5% | -- | |
| NOK | Buy NOK | -- | 10.25 | -- | 9.4 | +9.1% | -- | |
| SEK | Buy SEK | -- | 9.54 | -- | 8.8 | +8.4% | -- | |
| AUD | Buy AUD | -- | 0.64 | -- | 0.69 | +7.8% | -- | |
| GBP | Buy GBP | -- | 1.31 | -- | 1.41 | +7.6% | -- | |
| ZAR | Buy ZAR | -- | 17.31 | -- | 16.1 | +7.5% | -- |
Explore Report Sections
Macro Trade Themes
Navigating the Turn
Selective USD shorts
The dollar is turning lower but the path will not be straight. We advocate selective USD shorts rather than broad-based bearishness. Focus on currencies with clear fundamental catalysts -- GBP on fiscal clarity, EUR on rate convergence, and select EM on carry. Avoid overcommitting to aggressive USD targets given residual US growth resilience.
Sterling Renaissance
GBP top pick on fiscal clarity
GBP is our highest conviction G10 call. The UK budget has provided fiscal clarity that removes the Truss premium, while the BoE's hawkish stance maintains carry appeal. UK growth resilience and improving productivity metrics support GBP outperformance vs both EUR and USD. GBP/USD 1.41 and EUR/GBP below 0.86 by year-end.
EUR Range Trade
EUR/USD bounded 1.15-1.25
EUR/USD will strengthen but within a defined range. The upper bound at 1.25 reflects full pricing of German fiscal stimulus and Fed easing; the lower bound at 1.15 represents US growth resilience. Trade the range with a moderate bullish bias, targeting 1.21 by year-end.
EM Carry Selective
Long TRY, ZAR funded by JPY
EM carry remains attractive but selectivity is crucial. TRY and ZAR offer the best risk-adjusted carry when funded by JPY. Avoid broad EM baskets and focus on idiosyncratic stories with improving fundamentals. Election risk in Brazil warrants options-based exposure.
Commodity Upside
AUD/NOK on commodity demand
Green transition metals demand and energy security spending create a structural bid for commodity currencies. AUD and NOK are best positioned: AUD from base metals demand and RBA higher-for-longer, NOK from oil prices and European fiscal spillover. Express via AUD/NZD and NOK/SEK for relative value.