UBS says dollar strength will continue, forecasting EUR/USD at year-end to be below breakeven By Investing.com

Investing.com – Dollar bulls are unlikely to let up anytime soon, as higher Fed interest rates linked to other central banks and pro-growth policies including taxes are likely to ensure the dollar continues to lead against its G10 peers. . Including the euro, Canadian dollar and yen.

“The most likely path remains a stronger US dollar as part of the natural consequence of the US pursuing policies that generate excess demand, higher interest rates and also a stronger currency, at the same time as other countries are cutting interest rates,” UBS said in a recent note. And reducing inflation fears compared to growth fears.”

Euro: to end the year below the parity level against the US dollar: TThree bearish factors are affecting the euro

1. The convergence of interest rates with other low-yielding currencies such as the Japanese yen and the Swiss franc is expected to increase the euro’s attractiveness as a financing currency.

2. The political outlook for the Eurozone remains unhelpful, in light of the potential risks resulting from the German elections.

3. Concerns about US tariffs pose a threat to the eurozone economy.

UBS expects it to end 2025 at 0.990.

Japanese Yen: To take signals from the Bank of Japan amid hopes of raising interest rates to change the trend

The yen’s expectations are linked to expectations of shifts in the Bank of Japan’s policy. UBS expects the Bank of Japan to raise interest rates by 75 basis points, compared to the current market position of 50 basis points, which could support the yen.

But the path to raising interest rates by the Bank of Japan is not clear. UBS said the central bank raised interest rates in December and may not be keen to raise rates again at a time when “US policy is still unknown and could pose a risk to Japan,” pointing to the risks of US tariffs.

UBS expects it to reach 150 by the end of 2025, down from current levels of about 158.

CAD: The biggest trading opportunities in the Canadian dollar will be on the other side