The recent pullback in the USD should not be seen as the beginning of a trend reversal. In the view of economists at UBS, EUR/USD is set to plummet to the low 0.90s before bouncing to 0.96 at the end of March 2023.
Dollar strength to persist
“We think it is still too early to call for a peak in the USD. US inflation remains far too high, the Fed sees its own credibility at stake, and we think it will keep hiking aggressively until official measures of inflation take a breather.”
“We see the greenback continuing to appreciate in the fourth quarter before reaching a top in the first quarter of next year, which is when we expect investors to start pricing in an end to the Fed rate hike cycle.”
“We see EUR/USD dipping into the lower 90s in the coming months before rebounding to 0.96 at the end of March 2023 if, as we expect, the Fed signals a pause.”
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