Investing.com – The dollar recently marked fresh highs on the year against its rivals and is likely to remain strong after the Federal Reserve took a more hawkish stance at its recent December meeting, sources said. -analysis from UBS in a recent note.
“While we still expect the dollar to fall, we now see less weakness in 2025 given these factors and adjust our forecasts slightly,” UBS analysts said in a recent note.
The less bullish outlook on the USD comes after the greenback made fresh year-to-date gains in key exchange rates and expectations for fewer US rate cuts.
“The USD has been driven recently by expectations of fewer Fed rate cuts and tariff risks,” the analysts said.
The dollar's strength particularly affected the euro, but it is expected to trade around $1.05 against the greenback in the first half of 2025, according to the analysts.
But a sharp fall toward parity for those in need is unlikely, “due to serious risks of contagion or further divergence in the macro backdrop between the US and Europe,” he said. the monitors.
However, any move towards parity should be short-lived, the analysts said, amid expectations that Europe's economic backdrop will improve in the second half of the year, reducing the -difference between Europe and US output.
“The move back to the middle of the trading range or higher, 1.08 to 1.10, comes with the assumption that two-year yield differentials will remain relatively narrow and better macro data out of Europe providing fundamental support for EURUSD in 2H25,” the analysts said.
