Pro News Flash: Dollar Slips as EUR/USD Targets 2021 Highs

💶 EUR/USD is pushing toward its highest levels since 2021 as the US dollar comes under broad pressure from capital rotation and rising macro uncertainty.

📉 The dollar index has returned to last year’s lower bound, driven by portfolio diversification away from US assets, slowing growth concerns, and aggressive unwinding of carry trades. ETF data shows $17 billion flowing out of US-focused funds, while emerging markets attract record inflows.

🌍 Capital is moving decisively offshore. Since the start of January, emerging market ETFs have pulled in $134 billion, marking the strongest start to a year since 2012. Europe and Japan are also seeing inflows, though on a smaller scale.

💱 Carry trades are back in focus. With rate differentials still wide, major banks including Morgan Stanley, Bank of America and Citigroup expect the strategy to remain effective through 2026, favoring currencies backed by tight monetary policy and credible central banks.

🏛️ Political risk is adding fuel. Rising odds of a US government shutdown and rumors of coordinated FX intervention between the US and Japan are weighing further on the greenback, while expectations grow for earlier Fed easing.

⚠️ With the White House openly favoring a weaker dollar to boost competitiveness, the EUR/USD rally may still have room to run.

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