UBS appears for greenback consolidation at elevated ranges

Investing.com – A number of the post-election strikes within the US greenback have already been partially reversed, and UBS appears for extra of a consolidation at these ranges reasonably than a fair greater dollar within the near-term.

At 06:15 ET (11:15 GMT),   the Greenback Index, which tracks the dollar in opposition to a basket of six different currencies, traded 0.4% greater at 106.612, bouncing after falling to a one-week low earlier within the session. 

The index had climbed to its highest stage in a yr final week within the wake of Donald Trump’s victory within the presidential election.

Many market individuals consider that Trump 2.0 represents not only a re-run of the dollar-supportive US insurance policies from 2018-19 however a wider paradigm shift, analysts on the Swiss financial institution stated, in a observe dated Nov. 20.

Particularly, the concept import tariffs can play a extra substantial position in commerce and monetary coverage ought to be in step with USD appreciation by way of decreased imports in addition to an incentive for the US buying and selling companions to weaken their currencies.

“We’ve no sturdy motive to object to those views and have the truth is argued that the core message of the second Trump administration implies a better USD in 2025 and 2026,” UBS stated.

The financial institution’s reservations are extra tactical in nature. 

First, sustained vary breakouts require a continuing stream of dollar-positive headlines, and these could also be in shorter provide not less than earlier than Trump’s inauguration because the latest in-fighting over the Treasury Secretary nomination has highlighted. 

Second, since breakevens have performed an essential position in pushing US nominal yields greater, actual charge differentials are much less supportive for the greenback than nominal ones. 

Third, the market appears to have reached a restrict on pricing out Fed cuts over the following 12-15 months and will swing in the other way on any hints of weak point within the US information. 

“For these causes we nonetheless see a consolidation reasonably than a fair greater USD within the near-term, with EURUSD ending the yr at 1.07, in our view,” UBS added.