Citigroup strategists bearish on US dollar amid Fed, Treasury moves

Citigroup’s currency strategists have expressed a negative outlook on the US dollar, influenced by expectations of a less aggressive Federal Reserve, the approaching midterm elections, and the US Treasury’s planned increase in debt buybacks. This perspective follows recent movements in the dollar index, which on August 20, 2026, stood near a three-month low at approximately 98.8. The US Treasury’s decision to double long-dated debt buybacks from $2 billion to at least $4 billion per operation beginning September 9, 2026, is seen as a contributing factor to the dollar’s decline. This development has also led to lower long-term Treasury yields, compounding downward pressure on the dollar.

In prediction markets, the sentiment appears to align with a potential increase in gold prices. The market probabilities for gold hitting $4,600 in August have surged to 57% from 33% a week ago. Market participants seem to interpret the weakening dollar as supportive of higher gold prices, reflecting a historical inverse relationship between the two. The outlook on gold is further influenced by the potential for the Federal Reserve to adopt a more accommodative stance, which would likely bolster gold’s attractiveness as an inflation hedge.

Key Takeaways

• Citigroup’s outlook on the US dollar appears to reflect expectations of a less hawkish Federal Reserve and increased US Treasury buybacks.
• Market activity suggests that participants view a weaker dollar as supportive of higher gold prices, with increased probabilities for gold reaching $4,600 in August.
• Recent movements in Treasury yields and the dollar index indicate a broader market anticipation of shifts in US monetary policy and fiscal strategies.

What to Watch

Watch for upcoming statements from Federal Reserve Chair Jerome Powell and the Federal Open Market Committee, as their stance on interest rates could influence dollar strength and gold pricing. The US Treasury’s execution of its debt buyback strategy will also be a focal point, as it could further impact Treasury yields and the dollar. Additionally, developments in the geopolitical landscape and shifts in investor sentiment towards central-bank gold purchases could influence market dynamics and participant expectations.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.