UBS On-Air: Paul Donovan Daily Audio 'Uncertainty hits forecasts'
At a Glance
The desk believes that the current state of the U.S. dollar reflects ongoing uncertainty stemming from erratic fiscal policies, contributing to its proximity to recent lows against major currencies. Per the full note from UBS, the market is grappling with concerns over incomplete policy retreats, amplifying investor anxiety. While the U.S. economic data expected today, such as consumer confidence and durable goods orders, may not significantly alter market perceptions, they illustrate the broader environment of political partisanship that could cloud the economic outlook. As such, the dollar's performance is expected to be closely linked to these upcoming releases and political developments.
Key Takeaways
- 01U.S. dollar weak due to persistent economic and political uncertainties
- 02Consumer confidence data may reflect media influences more than economic realities
- 03Durable goods orders expected to show mixed signals amidst tariff uncertainties
Full Analysis
What the desk is arguing
The desk positions that the U.S. dollar is under pressure due to persistent political and economic uncertainties that continue to plague investor sentiment. The volatility introduced by extreme policy announcements and subsequent retreats signals that the market remains on edge regarding the sustainability of current economic practices. According to UBS's analysis, the dollar's weakness is compounded by the expectation that consumer confidence reports might be swayed more by media coverage than economic reality.
Supporting this perspective, the upcoming durable goods orders for April are anticipated to deliver mixed signals, reflecting gradual shifts in consumer behavior away from goods towards services. UBS mentions that this trend raises pointed questions about manufacturing resilience amid ongoing tariff uncertainties, which further complicates the economic landscape.
Where it sits in our coverage
At present, our consensus target for the EUR/USD pair stands at 1.075, with a range of 1.04 to 1.12. Notably, jpmorgan has aligned its target at 1.10 for March 26, while bofa maintains a contrary position with a lower target of 1.04 for the same tenor.
This viewpoint aligns with broader market sentiments, as the desk's forecast occupies a position closer to the upper end of the prescribed range, suggesting a more optimistic outlook for the euro against the dollar than some peers.
How other firms see it
Firms such as jpmorgan are aligned with our perspective, citing similar concerns over dollar weakness driven by political uncertainties. In contrast, bofa holds a fundamentally different outlook, favoring a more pessimistic stance on dollar performance based on potential economic downturns.
Given the current focus on U.S. economic indicators, the trajectory of the EUR/USD pair will likely reflect underlying confidence in upcoming consumer data and political developments, aligning directly with central bank sentiments around inflation and economic recovery.
Market Implications
Watch the upcoming consumer confidence data and durable goods orders closely, as they are likely to provide insights into economic sentiment and may influence the U.S. dollar's near-term trajectory. Key levels to watch are 1.075 resistance and the psychological level of 1.10 in the EUR/USD pair.
From the original
The US long weekend was marked by aggressive policies and then a retreat, but that still leaves its mark on financial markets. The US dollar remains near its recent lows against major currencies. Investors are concerned that the retreats may not be comprehensive, and that economi
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The desk underscores a cautious and data-dependent outlook on the U.S. dollar, emphasizing the recent lower conviction surrounding its trajectory. Per the full note by J.P. Morgan, this reflects significant uncertainties driven by systematic trade signals, potential U.S. government shutdown risks, and forthcoming payroll data that could shape market sentiment. As the dollar faces headwinds, the implications for EUR/USD remain particularly sensitive, especially given the current spot rate at 1.1419. Institutional forecasts indicate a wide range of perspectives on the euro's performance going into 2026, which solidifies the ongoing debates in FX markets.
Macro thoughts with Jonathan Pingle, UBS Investment Bank
The desk anticipates ongoing uncertainty in the U.S. trade policy landscape will continue to weigh on economic sentiment and the dollar. Per the full note [source], Jonathan Pingle from UBS highlights that recent tariff announcements exceeded market expectations, suggesting significant volatility ahead. This thought aligns with potential shifts in monetary policy direction as the Fed navigates these headwinds. Commentary on the evolving trade environment underscores the impact of tariffs on the economic outlook, especially as companies aim to adjust to the shifting landscape.
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