Greenback to weaken lower than anticipated subsequent 12 months: UBS

Investing.com — The greenback just lately notched contemporary year-to-date highs in opposition to its rivals and is more likely to stay sturdy after the Federal Reserve leaned extra hawkish at its current December assembly, analysts from UBS stated in a current observe.

“Whereas we nonetheless anticipate the greenback to fall, we now see much less weak point in 2025 given these components and alter our forecasts barely,” analysts from UBS stated in a current observe.

The much less bearish view on the USD comes within the wake of the buck making contemporary year-to-date highs in key alternate charges and the expectations for fewer U.S. fee cuts. 

“The USD has been pushed recently by prospects of fewer Fed fee cuts and tariff dangers,” the analysts stated.

The euro has been notably affected by greenback power, however is predicted to commerce round $1.05 in opposition to the buck within the first half of 2025, the analysts forecast. 

However a major drop towards parity for the EUR/USD cannot be dominated out, “as a consequence of actual tariff threats or additional divergence within the macro backdrop between the US and Europe,” the analysts added.

Nonetheless, any transfer towards parity ought to be short-lived, the analysts stated, amid expectations for the financial backdrop in Europe to enhance within the second half of the 12 months, narrowing the divergence between Europe and U.S. yields. 

“The trajectory again into the center of the buying and selling vary or increased, 1.08 to 1.10, comes with the view that two-year yield differentials will nonetheless slim to some extent and higher macro information out of Europe present some underlying assist for EURUSD in 2H25,” the analysts stated.