Investing.com — The greenback not too long ago notched contemporary year-to-date highs in opposition to its rivals and is prone to stay sturdy after the Federal Reserve leaned extra hawkish at its latest December assembly, analysts from UBS stated in a latest observe.
“Whereas we nonetheless count on the greenback to fall, we now see much less weak spot in 2025 given these components and regulate our forecasts barely,” analysts from UBS stated in a latest observe.
The much less bearish view on the USD comes within the wake of the dollar making contemporary year-to-date highs in key alternate charges and the expectations for fewer U.S. price cuts.
“The USD has been pushed recently by prospects of fewer Fed price cuts and tariff dangers,” the analysts stated.
The euro has been notably affected by greenback power, however is predicted to commerce round $1.05 in opposition to the dollar within the first half of 2025, the analysts forecast.
However a big drop towards parity for the cannot be dominated out, “resulting from actual tariff threats or additional divergence within the macro backdrop between the US and Europe,” the analysts added.
Nonetheless, any transfer towards parity needs to be short-lived, the analysts stated, amid expectations for the financial backdrop in Europe to enhance within the second half of the yr, narrowing the divergence between Europe and U.S. yields.
“The trajectory again into the center of the buying and selling vary or increased, 1.08 to 1.10, comes with the view that two-year yield differentials will nonetheless slender to some extent and higher macro information out of Europe present some underlying help for EURUSD in 2H25,” the analysts stated.
