The ‘Sell America’ trade inflicted ‘lasting damage’ on the U.S. dollar, ING says

Economic Overview - The U.S. economy grew at an annualized rate of 4.4% last year, with inflation declining and the stock market up nearly 12% over the last 12 months, suggesting strong confidence in the U.S. dollar [1] - Despite these positive indicators, the U.S. dollar is in decline, down 9.4% over the last 12 months and nearly 10% for 2025 against a basket of foreign currencies [2] Currency Performance - The dollar has lost 8% of its value against the British pound over the last 12 months, despite the U.K.'s annual economic growth being only 1.3% [2] - The dollar is down nearly 12% against the euro over the last 12 months, with each dollar buying only 84 cents in Paris [3] Market Sentiment - Equity traders are favoring European markets, with the Stoxx Europe 600 up nearly 4% year-to-date, while the S&P 500 is down 0.14% [4] - The "Sell America" trade is still in effect, indicating that despite a technically robust U.S. economy, there are headwinds affecting the dollar [4] Labor Market Concerns - Rising unemployment and weak hiring are contributing to the dollar's decline, with potential downward revisions expected for January job creation numbers [5][6] - The Federal Reserve's mandate to support the labor market may lead to new rounds of cheaper money, with expectations of two more interest rate cuts this year, which could further deter investment in dollar assets [6] Investor Confidence - Recent improvements in the U.S. macroeconomic picture have not been sufficient to restore confidence in the dollar, as indicated by ongoing market reactions [7]