The 'US exceptionalism' trade is back, and the positioning is already one-sided

Speculative dollar longs are at their highest level in over a year, with the largest single-week increase since 2018 according to CFTC data, and the macro case for it is firmer than a pure safe-haven snap. US core inflation printed 2.9% in May alongside 172,000 new jobs, and futures markets have not just delayed Fed cuts, they have started pricing a non-trivial probability of another hike by early next year. The mechanism is straightforward: the ECB and Bank of England face economies far more exposed to energy shocks and weaker domestic demand, so any easing they do widens the rate differential and sends capital toward USD assets, including the AI-investment boom that is drawing foreign equity and credit flows simultaneously. The risk is in the positioning itself. Net dollar longs this extreme have historically been a setup for a sharp reversal if a single CPI or payrolls print disappoints, so the trade has legs until it doesn't, and the stop-out could be fast. UK treasurers and CFOs running unhedged dollar payables should note that the current sterling weakness is not an aberration waiting to self-correct.