USD forecast to continue weakening

The US dollar is expected to continue to weaken. Photo: Xinhua

UBS predicts further depreciation of the US dollar due to narrowing interest rate differentials, concerns about the ongoing US fiscal deficit and changes in global central bank strategies.

Despite the brief rally, UBS downgraded the US dollar to “least favored”, while upgrading the euro, pound and Australian dollar.

Bitcoin News reported that UBS - a Swiss multinational investment bank and financial services company - has just released a report stating that the USD is likely to continue to depreciate.

“We expect the US dollar to continue to weaken in the coming months for a number of reasons,” the report said.

Although the dollar enjoyed a brief rally after revised US second-quarter GDP growth figures – up to 3% annualised from 2.8% – and stronger consumer spending data, the greenback remains vulnerable, UBS noted.

The USD Index (DXY) has fallen 3% over the past month, remaining near the lowest point in its range since early 2023.

UBS analysts stressed that “the balance of risks for the USD appears to be skewed to the downside,” suggesting that even positive inflation or labor market data is unlikely to prevent the US Federal Reserve (FED) from a potential rate cut in September, especially if these indicators miss expectations.

Several factors are poised to put further pressure on the dollar, according to UBS. The Swiss financial services firm noted that “interest rate differentials look set to narrow,” as central banks like the Swiss National Bank and the European Central Bank are expected to take a more gradual approach to rate cuts than the Federal Reserve.

Additionally, UBS stressed, "the US fiscal deficit remains a concern," highlighting long-term risks for the greenback.

In response to these moves, UBS Chief Investment Office has adjusted its global strategy: "In this context, we recently downgraded the US dollar to least favored in our global strategy and moved the euro, British pound and Australian dollar to most favored. We expect all of these currencies to regain their positions against the US dollar over our forecast horizon," the report added.

Source: https://laodong.vn/kinh-doanh/du-bao-dong-usd-tiep-tuc-suy-yeu-1388225.ldo