Overview
Deutsche Bank AG, through a note authored by George Saravelos, head of currency strategy, stated that yield has been the dominant force in foreign‑exchange (FX) markets throughout 2026, keeping carry trades attractive as the global economy remains stable. The commentary was published on 10‑07‑2026 at 06:30 pm by Louis Juricic (Reuters/Investing.com).
Recent Currency Movements
The note highlighted modest recent price changes in major pairs: the euro fell 0.05 % against the US dollar, the US dollar slipped 0.33 % versus the Japanese yen, and the Swiss franc weakened 0.02 % against the US dollar.
Key Drivers
Saravelos emphasized that risk‑adjusted carry has been the most important factor behind 2026 currency movements, even as the market contended with a war in the Middle East, leadership changes at the Federal Reserve, and large shifts in technology‑stock valuations. The hawkish repricing of the Fed emerged as the primary positive catalyst for the dollar. However, Saravelos noted that for Fed policy to generate larger dollar moves, the market would need to price in additional rate hikes of 75 to 100 basis points or more, which would restore the dollar to a high‑yielder status.
Outlook for Major Currencies
Deutsche Bank does not see a strong reason to expect the euro to fall further nor the dollar to rise broadly, citing potential upside risks to European growth expectations. The yen continues to face pressure from its low yields relative to other major currencies, though Japan’s efforts to promote domestic investment could provide support. The bank prefers using the Swiss franc rather than the yen for funding carry trades.
Japan‑Specific Insight
The note referenced Japan’s 2014 Government Pension Investment Fund (GPIF) reform as an illustration of how changes in domestic flow expectations can trigger significant FX movements, even when policy implementation is gradual.
Disclosure
The article was generated with AI assistance and reviewed by an editor, with standard Reuters terms and conditions applying.