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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The desk views the recent commentary from Ulrike Hoffmann-Burchardi as a reaffirmation of a dovish pivot by the Fed, which is anticipated to support risk assets, particularly equities. Per the full note source, indications of potential rate cuts align with soft landings seen historically as bullish for equities and mixed for bonds. The commentary also stresses the dual focus on macroeconomic signals and developments in the AI sector, suggesting market participants should remain vigilant. As we lack imminent calendar catalysts, the market may continue to digest this dovish sentiment ahead of key economic data releases later in the month.
The desk positions that the Fed's anticipated rate cuts, framed by dovish commentary from Chair Powell, will positively impact risk assets. This perspective is reinforced by historical patterns, where rate cuts in a soft landing scenario have typically flavored bullish trends in equities.
Additionally, Hoffmann-Burchardi pointed to critical macro signals, including ongoing developments in US-China relations around technology, which could further stabilize market expectations. Notably, the median dot plot now shows two more rate cuts this year, aligning closely with UBS's projections.
Our current consensus target for the USD/FX pair is 1.075, with a range spanned between 1.04 and 1.12. We observe specific forecasts from: - jpmorgan — target at 1.10 for Mar-26. - bofa — target at 1.04 for Mar-26.
This dovish read from the desk aligns with jpmorgan's more bullish stance, situated near the upper bound of the consensus range. Conversely, bofa adopts a more cautious outlook, forecasting a stronger dollar in the near-term.
Market consensus leans towards a bullish interpretation with firms like jpmorgan aligned on rate cuts favoring risk assets, while bofa posits a contrary view, maintaining strength in the dollar against expectations of policy easing.
In relation to these views, the USD/JPY trajectory is noteworthy, reflecting broader dollar strength or weakness against the yen in light of potential Fed movements. Additionally, watch for macroeconomic indicators that could sway market sentiment such as CPI reports or employment data.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should monitor the USD/JPY pair for reactions to further Fed commentary and potential economic data releases. Current levels should be observed closely as the market digests the implications of a dovish Fed.
Risks to this view
Any significant economic data that deviates from the dovish narrative, such as robust employment figures leading to a reassessment of the Fed's cutting stance, could challenge the current bullish sentiment and prompt market reversals.
Hello, and welcome to Signal Over Noise, the new title to our weekly podcast. I'm Ulrike Hofmann-Borchardti, CEO for the Americas and Head of Global Equities for UBS Wealth Management. The single most common question that we tend to get from our clients is, what truly matters for the markets and what is just noise?
Question feels even more urgent today, when news can matter on so many different levels, so we thought we'd turn our weekly podcast into a compendium to our written Signal Over Noise series. There we deep dive into topics that we think are underappreciated by investors. So let's start with the signals that stood out last week and then go into what matters this week.
And let me filter the news through the two lenses that have mattered most to the markets this year, macro and AI. On the macro side, we now see a clear path to a sequence of rate cuts. Fed Chair Powell used quite dovish language around the labor market weakness.
This is similar to what he did last September when the Fed cut three times in a row. The median dot plot now shows two more cuts this year, in line with our expectations. Fed cuts in a soft lending scenario, which we think is likely, have historically been bullish for equities mixed for bonds.
The short end of the curve tends to benefit more than the long end. Also, on the macro side, according to President Trump, there seems to be progress towards a resolution of TikTok's US operations. The key questions concern the shared access to data and the algorithm.
And resolving this issue would bring us closer to a US-China trade deal. Secondly, on AI, Nvidia's $5 billion investment into Intel is a win-win-win situation for the US government, for Intel, and for Nvidia. For the US government, it is a chance to reinvigorate the path towards US manufacturing of leading-edge ships.
For the US, chip manufacturing is one of the largest points of dependency on Taiwan. For Intel, besides gaining resources for its foundry business, it is a chance to reset its course towards AI, and it will likely open the door to more customer investments, now that Nvidia and the US government led the way with equity investments. For Nvidia, it opens the door to an Intel-based version of its AI chips, reducing its reliance on AMD and positioning it to benefit in an AI-PC upgrade cycle.
So all in, good news for US equities. The bond markets, on the other hand, priced out an overly bullish rate cut scenario. So turning to next week.
Next week is light with scheduled news releases. Both the Micron print on Tuesday and PCE on Friday have been largely preempted by prior releases. So rather than add more noise, I'll keep it short and leave you with the most important signal, as always, stay well and stay ahead.
UBS Chief Investment Office's investment views are prepared and published by the Global Wealth Management Business of UBS AG, or its affiliate, UBS. This material has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is published for informational purposes only. As a firm providing wealth management services to clients globally, UBS AG and its subsidiaries offer both investment advisory services and brokerage services.
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