USD: Risk premia keeps upside in place – TD Securities

FXStreet Insights Team FXStreet

TD Securities strategists argue that US Dollar upside should persist while global risk premia stay elevated, even though their longer-term 2026 view remains bearish. They highlight a safe-haven bid versus relative rate headwinds, see scope for a near-term USD positioning adjustment, and flag rich Dollar valuation versus fundamentals in their HFFV model.

Safe-haven support versus rich valuation

"Baseline: USD upside should persist as long as risk premia remains elevated. We are not yet revising our bearish USD view for 2026, particularly if an off-ramp to the war emerges in the coming weeks. In that scenario, fading US growth exceptionalism, a reduced safe-haven premium, and a potential intensification of the “Hedge America” trade following recent US actions would all weigh on the dollar."

"FX volatility is likely to rise once growth concerns dominate. Tactical central bank hawkishness may offer temporary currency support, but a broader risk-off episode—via equities, positioning and rates—would keep the USD bid and push pressure into high-beta G10 and EMFX as the chain reaction completes."

"Risk-off dynamics—via positioning unwinds, equity drawdowns, and terms-of-trade shocks—point to broader USD strength."

"We see risk premium in broad dollar pricing. It is rich against most currencies according to our HFFV model especially as the USD has not weakened in line with relative rates pricing recently."

"Our aggregate portfolio has switched to a negative trading weight in the USD from a positioning clean out and technical valuations not looking as cheap anymore."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD: Downward-sloping trendline near 1.3470 remains key barrier

The British pound faces selling pressure against its major currency peers, trading 0.1% lower at around 1.3420 against the US Dollar during the European trading session on Tuesday.

Euro clings to the bid bias above 1.1500

EUR/USD has picked up pace, reversing Monday’s decline and advancing past the 1.1500 barrier on Tuesday. In the meantime, hopes for a diplomatic solution to the Middle East crisis keep the US Dollar under modest downside pressure, helping spot in its recovery.

Coinbase Bitcoin Premium Index extends historical negative streak as risk appetite deteriorates

The Coinbase Bitcoin Premium Index extends its negative streak to 78 consecutive days on Tuesday, the longest on record. This reading comes amid the ongoing bearish trend, which has seen Bitcoin (BTC) drop by almost 50% from its record high to trade around $64,000.

Why the WTI sell-off may be hiding a supply warning

Prices for the barrel of the American Oil benchmark have fallen sharply as hopes of a US-Iran agreement have resurfaced, but a deeply backwardated Oil curve, tight Cushing stocks and light speculative positioning all warn that the sell-off may have gone too far.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.