UBS revised its exchange rate forecast, citing a lack of strength in the US dollar, despite expectations that some political events would boost it. Contrary to those expectations, gold and bitcoin prices posted gains, while the US dollar did not.
UBS’s revision reflects a elaborate interplay of factors, including recent delicate U.S. economic data and a decline in Treasury yields, which failed to support the dollar as expected.
The bank revised its third-quarter and end-2024 EUR/USD forecasts to 1.08, down from a previous forecast of 1.05. The change comes amid market speculation that the Federal Reserve could consider a 50 basis point rate cut in 2024, with discussions on rate cuts potentially starting as early as September.
These expectations have a greater impact on currency valuations than the Trump administration’s potential policies related to the US dollar should he win the upcoming election.
UBS’s revised forecast is in line with the Federal Reserve’s recent monetary policy outlook, which now includes the possibility of two rate cuts in 2024. Meanwhile, the European Central Bank (ECB) maintained a cautious stance on future rate cuts.
While these developments weaken the chances of the euro hitting recent lows in 2024, UBS still expects a moderate decline in the euro given the potential weakening of growth rates in huge economies such as France.
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