We often get asked about the prospects for the (broad) dollar in an environment of accelerating global growth.
Historically, the dollar usually peaks and begins to decline well in advance of the Fed delivering the first cut, but this has not been the case in the current cycle given the divergent regional global growth trajectories we have seen to date.
This has led to our (often) out-of-consensus strong dollar view, held since mid-2023.
Yes, the eurozone is expected to pick up the growth mantle from here, however, there are reasons to expect this won't translate into dollar weakness. The great equity sector rotation of 2022/3 was underwhelming. Eurozone equity performance has been relatively weak over the past year and although we expect this to turn in the near term, we do not think capital inflows into the eurozone will be sufficient to dethrone the greenback in the next phase of the cycle.