MUFG
2026 FX Outlook: Post-Peak USD World
Performance Snapshot
DXY
100.2
Target: 95
EUR/USD
1.15
Target: 1.24
USD/JPY
157
Target: 146
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 | -- | 52 | -18.4% | -- | |
| HUF | Buy HUF | -- | 332 | -- | 298 | +10.2% | -- | |
| PLN | Buy PLN | -- | 3.67 | -- | 3.32 | +9.5% | -- | |
| AUD | Buy AUD | -- | 0.64 | -- | 0.7 | +9.4% | -- | |
| SEK | Buy SEK | -- | 9.54 | -- | 8.7 | +8.8% | -- | |
| NOK | Buy NOK | -- | 10.25 | -- | 9.4 | +8.3% | -- | |
| EUR | Buy EUR | -- | 1.15 | -- | 1.24 | +7.8% | -- | |
| ZAR | Buy ZAR | -- | 17.31 | -- | 16 | +7.6% | -- |
Explore Report Sections
Macro Trade Themes
Post-Peak USD
Broad USD weakness throughout 2026
The US dollar has peaked and we expect a steady 5% decline on DXY through 2026. Unlike the consensus for a volatile path, we see consistent dollar weakness driven by twin deficit expansion, Fed easing, and global growth convergence. No H2 recovery expected. Express via broad USD shorts against EUR, GBP, and commodity currencies.
European Fiscal Renaissance
Long EUR on German spending
Germany's relaxation of the debt brake and infrastructure investment fund marks a structural shift for European growth. Combined with EU-wide defense spending increases, this creates the strongest European fiscal impulse since reunification. EUR/USD to 1.24 is our top conviction call. European FX broadly benefits including NOK and SEK.
Yen Mean Reversion
Long JPY on BoJ normalization
BoJ normalization to 0.50-0.75% combined with Fed easing creates powerful rate convergence. USD/JPY to decline to 146 by year-end. Japanese institutional investors likely to repatriate as domestic yields rise. Carry unwind risk provides additional downside asymmetry. Steady yen appreciation rather than sharp moves.
Commodity Currency Tailwinds
Long AUD, NOK on commodity recovery
Base metals recovery and oil price stability create tailwinds for commodity-linked currencies. AUD and NOK are our preferred expressions. Both benefit from central banks on hold (RBA, Norges Bank) maintaining high yields. China stimulus provides upside risk for AUD. NOK is the most undervalued G10 currency.
EM Carry Harvest
Funded by low G10 vol
Low G10 vol environment creates optimal conditions for EM carry harvesting. DM-funded EM carry strategies should outperform as central bank activity remains subdued. Prefer ZAR, PLN, and MXN for carry. Use options-based approaches for BRL and TRY given election/political risks. Carry-to-vol ratios remain attractive.