The has climbed greater than 3% for the reason that begin of the yr, pushed primarily by robust US financial information and rate of interest cuts in different main economies. Nonetheless, UBS strategists imagine these intervals of greenback energy can be utilized to cut back greenback publicity or to have interaction in volatility promoting methods to generate earnings, anticipating possible price cuts later this yr.
In actual trade-weighted phrases, the US greenback just isn’t low-cost, at the moment at ranges much like these seen within the mid-Eighties and early 2000s, strategists famous.
“We imagine depreciation pressures might mount if markets begin to value a deeper Fed rate-cutting cycle. Fears in regards to the measurement of the US fiscal deficit can also contribute to a weaker dollar over the long run,” they wrote.
A Republican sweep of the White Home and Congress might 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 might anticipate this impact to be weaker than throughout Trump’s first time period,” UBS’s staff added.
Amongst international currencies, the financial institution has probably the most most well-liked stance on the Swiss franc. The foreign money has depreciated by round 6% towards the US greenback year-to-date, with the Swiss Nationwide Financial institution (SNB) being the primary main central financial institution to chop charges.
“We anticipate the Swiss franc to understand from right here and transfer the foreign money to most most well-liked from impartial,” strategists stated.
UBS expects the SNB to additional decrease its coverage price to 1.00% from 1.25% following June’s price reduce. 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 yr at round $87 per barrel, supported by strong demand and OPEC+ efforts to steadiness the market. For risk-tolerant buyers, promoting Brent’s draw back value dangers may very well be thought-about.
Strategists additionally anticipate the market to stay in a deficit from a elementary perspective, forecasting the steel to succeed in $11,500 per metric ton by year-end.
For gold, the financial institution retains its bullish view, primarily attributable to robust central financial institution reserve diversification demand and its position 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.