HSBC: "Explosive Dollar Rally" – a problem for the second half of 2026.

Analysts at HSBC believe that a sharp strengthening of the dollar could become one of the most painful market situations in the second half of this year.

This refers to a "pain trade" – a scenario the market is poorly prepared for. If it materializes, investors have to close positions urgently, and volatility increases.

What supports the dollar:

➤ Weakness in the European economy and the euro: falling oil prices reduce inflationary pressure, so the market may expect a more dovish policy from the ECB.

➤ The yen at a 40-year low due to Japan's reluctance to raise rates quickly.

➤ Hedge funds have increased bets on a stronger dollar to a 16-month high.

HSBC's base case is a gradual strengthening of the dollar until the first half of 2027. The main risk is a sharp "explosive" spike if the Fed becomes more hawkish than expected or if geopolitics intensifies again.

For risk assets: a strong dollar usually pressures liquidity, emerging markets, and cryptocurrency.