Bank of America’s quantitative event-analysis framework signalled a clear market preference for selling the U.S. dollar after a cluster of geopolitical incidents pushed up risk premia for the currency last week, the bank said.
The bank pointed to several specific developments that coincided with selling pressure on the dollar: a rapid escalation and subsequent cooling of tensions involving Greenland, public threats of 100% tariffs on Canada, and a rate-check episode by the New York Federal Reserve that affected USD/JPY, according to BofA’s report.
BofA said its event tool issued multiple bearish USD alerts. The indicators included falling spot dollar rates, a shift in option flows toward USD puts, and changes in skew that moved against USD calls. Together, those signals contribute to the bank’s negative near-term view on the currency, based on their models.
The bank’s trend-reading algorithms singled out a handful of currencies as attractive plays against a softer dollar. The British pound, the Swiss franc and various Scandinavian currencies were specifically flagged as likely beneficiaries of recent dollar selling, BofA reported.
Notably, the bank observed that most of the dollar liquidation occurred among U.S. investors during the second half of last week. That investor base behaviour was highlighted as a material component of the recent flows that pressured the dollar.
BofA also noted that cross-asset price movements so far this month could, in theory, provide temporary relief for the dollar at month-end. Even so, the bank recommended monitoring for additional bearish USD headlines from foreign asset managers this week as potential triggers for further directional movement.
Taken together, BofA’s quantitative signals indicate a shift in market positioning toward dollar weakness, with specific currency pairs and investor flows reflecting that stance. The bank’s message to market participants is to remain attentive to incoming headlines that might confirm or reverse the recent directional bias.