Barclays Sees European Equity Boost as Dollar Weakens, Repatriation Flows Rise

A persistently weak U.S. dollar could fuel a rally in European equities as repatriation flows gain momentum, Barclays analysts said in a note to clients Tuesday.

Led by strategist Emmanuel Cau, the team noted there’s little reason for the dollar to move meaningfully above its fair value, which they peg around $1.15 to the euro. The greenback has dropped roughly 10% from its January highs amid market unease over President Trump’s tariff policies and concerns about the Federal Reserve’s independence.

Trump signaled a potential softening in trade tensions with China, telling reporters U.S. tariffs could ease following a deal—though not fully disappear. Treasury Secretary Scott Bessent echoed a more diplomatic tone, saying talks with Beijing, while slow, remain constructive.

Markets were further reassured after Trump said he has “no intention” of firing Fed Chair Jerome Powell, a move that had been feared ahead of the Easter weekend. However, Trump also urged Powell to be “more active” in lowering rates.

Barclays warned that despite the cooled rhetoric, political interference and “dovish pressure” on the Fed could continue eroding confidence in the dollar. The resulting risk premium may further weaken the greenback and unsettle Treasury markets.

European stocks, already outperforming U.S. counterparts since Trump’s April 2 tariff announcement, could gain more ground. Barclays pointed to a reversal in the “U.S. exceptionalism” trade, with European investors starting to move capital back home.

“If repatriation continues, expect further euro strength and outperformance in EU equities,” the note concluded.