Stronger USD But Path Non-Linear: New FX Forecasts – UBS - Forex Crunch

What the desk is arguing

UBS contends that while the US dollar is on an upward trajectory, the journey will be marked by volatility and erratic movements. They cite factors such as changing interest rates, inflation data, and global economic performance as drivers of this non-linear strengthening.

The firm emphasizes that market participants should expect fluctuations as new economic data comes to light and geopolitical tensions evolve. This outlook implicitly challenges the view that a steady and predictable appreciation of the USD is forthcoming, urging caution among traders.

Where it sits in our coverage

Our current consensus target for the USD reflects a gradual appreciation trend, aligning with UBS's view of a strengthening dollar but acknowledging the hurdles along the way. The consensus target stands at 1.075 with a range of 1.04 to 1.12, indicating a confidence in a stronger dollar, albeit with anticipated volatility.

In line with this analysis, other institutions have published similar targets that reflect their outlooks on the USD. Specifically:

• Barclays: Target of 1.08, questioning the sustainability of the dollar's rise in light of global growth.
• JPMorgan: A more aggressive target of 1.10, suggesting confidence in the USD as rates diverge from other major currencies.

How other firms see it

Other firms have positions that complement or diverge from UBS's stance on the USD. For instance, Goldman Sachs frames a bullish outlook on the USD but emphasizes potential obstacles from international market dynamics.

Conversely, the view from BofA presents a more cautious approach, reflecting concerns over a possible slowdown in the US economy impacting dollar strength.

• Goldman Sachs: Aligned, bullish outlook with emphasis on GDP growth.
• BofA: Contrary, highlighting economic slowdown fears impacting USD demand.