Global currencies: balances and tensions in 2026

Global currencies: balances and tensions in 2026

The dollar, pound and euro between geopolitics and macro divergences

U.S. Dollar: the 2025 turning point and early moves in 2026

2025 was particularly challenging for the U.S. dollar: the U.S. Dollar Index (DXY), which measures the dollar’s value against a basket of global currencies, closed the year down about –9% year on year. At key moments during the year, the index also fell below 97.5, its lowest level in years, reflecting a prolonged sell-off.

The main causes of this weakness include:

• Domestic political pressures and tensions over the independence of the Federal Reserve, impacting international sentiment.
• Expectations of interest rate cuts by the Fed compared with other central banks, reducing the appeal of dollar-denominated assets.
• Increased demand for alternative safe havens, including other currencies and precious metals.

In the first weeks of 2026, however, the dollar has shown mixed behavior: the DXY is hovering around 99/99.2, with technical rebounds after the late-2025 lows. Some reports also point to an early-January uptick toward around 98.8 on certain days.

Technical analysis: after a predominantly bearish trend throughout 2025, early-2026 price action shows sideways consolidation with higher volatility, suggesting markets are pricing in political uncertainty and mixed macro data.

Outlook: if domestic political pressures and a potential shift in Fed governance intensify, the dollar’s weakness could accelerate, undermining its perception as the ultimate safe-haven currency. Conversely, surprisingly strong U.S. economic data could trigger a technical rebound. Markets remain divided between a scenario of further structural weakness and a short-term correction.

EUR/USD: the euro rebounds

The EUR/USD pair experienced a strong year for the euro in 2025: the exchange rate rose from around 1.04 at the start of the year to roughly 1.17/1.18 by the end of 2025, marking a gain of over +12% year on year.

At the start of 2026, the cross has moved back around 1.16/1.17, with some technical fluctuations, but remains significantly higher than in the recent past.

Fundamental drivers:

• Macro recovery in the euro area and improved sentiment thanks to more expansionary fiscal policies.
• Lower perceived risk and a reduction in the eurozone risk premium compared with 2024.
• Dollar weakness, which amplified the euro’s gains.

Outlook: according to some market forecasts, EUR/USD could rise toward 1.20 and beyond in the medium term if dollar weakness persists and European growth remains solid. From a technical perspective, key levels to watch in 2026 are 1.17/1.18 (resistance) and 1.15 (support).

GBP/CHF: a relative safe haven

In 2025, the GBP/CHF pair showed a slight overall decline over the year, with year-on-year changes of around –3.4% and a trading range between 1.036 and 1.150.

This reflects:

• A pound that, while strengthening against the dollar and other crosses, lost ground to the Swiss franc, a traditional safe haven in times of uncertainty.
• A strong franc, linked to a perceived higher level of economic security and relatively more stable policy management.

At the start of 2026, GBP/CHF remains in the 1.07/1.08 area, indicating relative stability but still under technical pressure compared with the 2025 highs.

Outlook: if global uncertainty increases (e.g., geopolitical tensions or market shocks), the CHF could strengthen further, pushing GBP/CHF toward new lows. Conversely, improved UK data or reduced global risk aversion could lift the pound back above 1.10.

EUR/AUD: technical and fundamental outlook

The EUR/AUD pair reflects the contrast between a more defensive currency (the euro) and a more commodity-sensitive one (the Australian dollar). During 2025, the AUD benefited from the recovery in commodities and strong trade ties with Asia, often leading to AUD outperformance versus the euro.

At the start of 2026, EUR/AUD has shown sideways movement with a mild-to-moderate short-term bullish bias, while remaining subject to volatility driven by Chinese data and expectations for Australian monetary policy.

Outlook:

• Bullish EUR/AUD scenario: if the euro area consolidates growth and stable inflation, increasing the euro’s attractiveness.
• Bearish EUR/AUD scenario: if a stronger-than-expected Asian recovery supports the AUD and puts pressure on commodity-linked currencies.

Key technical levels for 2026: resistance at 1.58/1.60 and support at 1.52/1.50 (indicative of historical volatility ranges).

In summary

2025 marked a regime shift for many currencies: the dollar lost part of its safe-haven momentum, while the euro and other crosses such as GBP and AUD gained ground. The first weeks of 2026 point to consolidation, with technical signs of potential stabilization but no definitive trend reversal yet. From a macro perspective, geopolitics and monetary policy remain the key drivers of currency movements, and future prospects will depend as much on hard economic data as on global safe-haven sentiment.