The has climbed greater than 3% because the begin of the 12 months, pushed primarily by robust US financial knowledge and rate of interest cuts in different main economies. Nonetheless, UBS strategists consider these durations of greenback power can be utilized to scale back greenback publicity or to interact in volatility promoting methods to generate earnings, anticipating seemingly charge cuts later this 12 months.
In actual trade-weighted phrases, the US greenback shouldn’t be low-cost, at present at ranges just like these seen within the mid-Nineteen Eighties and early 2000s, strategists famous.
“We believe depreciation pressures could mount if markets start to price a deeper Fed rate-cutting cycle. Fears about the size of the US fiscal deficit may also contribute to a weaker greenback over the longer term,” they wrote.
A Republican sweep of the White Home and Congress may increase expectations for a stronger greenback. Nonetheless, given the already elevated worth of the US greenback, which is 17–18% stronger than when President Trump first took workplace, “we’d count on this impact to be weaker than throughout Trump’s first time period,” UBS’s staff added.
Amongst world currencies, the financial institution has probably the most most popular stance on the Swiss franc. The foreign money has depreciated by round 6% in opposition to the US greenback year-to-date, with the Swiss Nationwide Financial institution (SNB) being the primary main central financial institution to chop charges.
“We expect the Swiss franc to appreciate from here and move the currency to most preferred from neutral,” strategists stated.
UBS expects the SNB to additional decrease its coverage charge to 1.00% from 1.25% following June’s charge minimize. The franc is thought for its safe-haven qualities, providing stability amid political uncertainty in Europe, the US, and elsewhere.
Furthermore, strategists see a number of extra alternatives within the commodities market.
They forecast costs to finish the 12 months at round $87 per barrel, supported by strong demand and OPEC+ efforts to stability the market. For risk-tolerant buyers, promoting Brent’s draw back value dangers might be thought of.
Strategists additionally count on the market to stay in a deficit from a basic perspective, forecasting the steel to achieve $11,500 per metric ton by year-end.
For gold, the financial institution retains its bullish view, primarily because of robust central financial institution reserve diversification demand and its function as a portfolio hedge forward of the US elections. Of their base case, UBS forecasts gold rising to $2,600 per ounce by year-end and $2,700 per ounce by mid-2025.
