According to a survey, traders are expected to maintain a net short position on the U.S. dollar through November. This trend is anticipated as the currency is projected to weaken in the coming months due to ongoing expectations of multiple interest rate cuts by the Federal Reserve. Rate futures are presently indicating three to four cuts by the end of 2026, in addition to the two already implemented at recent FOMC meetings. This comes despite Chair Jerome Powell’s recent comments suggesting that a December cut is far from guaranteed, given the increasing divisions within the Fed regarding future cuts. Policy decisions have become more complex due to an unprecedented 36-day U.S. government shutdown, which has delayed several crucial economic releases. This situation has resulted in officials having limited visibility on the economy and an increasing reliance on private data and alternative indicators.

Due to the absence of official positioning data, currency traders are left uncertain about the extent of bearish dollar bets. This situation compels major banks to rely on alternative flow trackers and proprietary models to deduce market positioning. In a recent survey conducted from October 31 to November 5, two-thirds of strategists, totaling 30 out of 45, forecasted that traders would hold net short positions on the dollar by the end of November. However, some analysts indicated that these positions may not be as bearish as previously reported. “I anticipate that once the data is released, the positioning will appear significantly less bearish than it did previously. Our in-house proprietary indices, which aim to assess market positioning through various indicators, indicate that dollar positioning appears only modestly bearish – not as stretched as it once was – gradually moving towards neutral levels,” stated Jayati Bharadwaj.

“Analyzing market price action and considering the broader context for investors, it is evident that clients have been attempting to acquire dollars since the conclusion of summer and into the early part of autumn.” According to reports, interest rate futures pricing suggests a roughly 70% probability of a December Fed rate cut, a decrease from nearly 90% prior to last week’s policy meeting. The ‘sell dollar’ trade has been tempered, yet the overall outlook remains unchanged. The greenback has subsequently reduced some of its losses, currently down approximately 8% for the year, a decrease from nearly 11% in September. Nevertheless, the strategists participating in the survey largely maintained their previous forecasts, anticipating the euro to appreciate by just under 3% to $1.18 in three months and to $1.20 in six months. The median year-ahead forecast of $1.21 has remained largely unchanged for four consecutive months.

The evident prudence in projections was similarly mirrored in the respondents’ perceptions of the risk balance. A slim majority – approximately 53%, or 33 out of 63 respondents – indicated that the dollar was more likely to conclude the year at a weaker position than they had anticipated. The remainder indicated a more robust position. “Our projection for 2026 and the subsequent years indicates that there will be a growing political impact on the Federal Reserve. That’s just the way it’s set up – that the White House gets more votes on the Fed Board the longer it’s in office,” said Vincent Reinhart. “However, this White House is notably more proactive in exercising that control.” Our analysis indicates that we foresee the policy rate declining significantly and the dollar experiencing depreciation.