Euro-Dollar Forcasts Upgraded at Julius Baer
- Written by: Gary Howes
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Julius Baer argues recent USD strength should be viewed as corrective, not decisive.
The dollar’s sharp selloff at the start of the year may have paused, but the forces that drove it lower remain firmly in place, according to fresh analysis from Swiss private bank Julius Baer.
While recent weeks have seen the greenback recover some lost ground after fears of outright debasement eased, Julius Baer argues the move should be viewed as corrective, not decisive.
With structural pressures still pointing to renewed and gradual dollar depreciation over the months ahead, analysts upgrade their euro-to-dollar forecast.
Key research quotes:
○ We stick to our view of continued dollar weakness, driven primarily by structural current-account outflows, as mentioned above, which should allow for further gradual depreciation.
○ Furthermore, a continuation of Fed policy easing reduces the dollar’s favourable interest rate differentials against peers.
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○ Ultimately, the unsustainable fiscal stance, an arbitrary trade policy, and policymaking that undercuts checks and balances in the US and contributes to bad publicity, continue to put question marks over the long-term value of the US dollar.
○ In this context, active dollar debasement is a key downside risk that can accelerate this weakening, but not the main rationale of our call for continued US dollar weakness.
○ After the US dollar has reached our three-month forecast of EUR/USD 1.18, we maintain a bearish ranking and roll our forecasts to 1.18 in three months and 1.24 in 12 months’ time.
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