UBS Morning audio comment: Uncertain times

What the desk is arguing

The emphasis on uncertainty in the Federal Reserve Beige Book suggests that businesses are hesitant to commit to hiring or expansion plans, according to Paul Donovan of UBS. This hesitance could lead to a stagnation in economic recovery, especially as labor market indicators present mixed signals, highlighting the broader implications for future Fed policy.

Particularly concerning is the low hiring activity captured in current labor market data, where initial claims remain stable but fail to reflect reluctance among employers to add positions. The increased mentions of uncertainty compared to prior years could point to potential market volatility as businesses adapt to these challenges.

Where it sits in our coverage

Our current consensus target for the USD is 1.075, with a range between 1.04 and 1.12. Specifically, notable forecasts include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

The desk's perspective aligns closely with jpmorgan, which foresees a stronger dollar by March 2026, while diverging from bofa, which anticipates a weaker dollar at the same interval. The desk's position is at the upper boundary of the consensus range.

How other firms see it

Firms such as jpmorgan and citi view the ongoing uncertainty as a risk that supports a more robust dollar. In contrast, bofa and barclays hold a more pessimistic outlook, predicting weaknesses for the USD ahead.

Pay particular attention to labor market trends and inflation reports, as these directly correlate with the Fed's policy decisions and could impact the USD/USD trajectory significantly.