UBS sees a well-supported USD in the months ahead, citing comparatively resilient US economic data, but are wary of it weakening slightly as 2024 progresses. UBS say that would be in response to significantly slowing US economic data, and Fed policy.
- "We expect economic growth to slow sharply in the next few quarters, with a mild contraction worth half a percentage point in the middle of the year,"
- expects GDP to grow just 0.3% in 2024
- expects the unemployment rate to rise to 5.0% at the end of 2024
- Fed will move Fed Funds slightly lower in March
- IN H2 rate cuts will accelerate
- Fed to cut rates by 275 basis points, leaving the effective federal funds rate at 2.50%-2.75%
As such UBS is looking to sell US dollars into rallies.
UBS hold a 'most preferred' view on the Australian dollar, citing risks of another hike by the Reserve Bank of Australia and also for the Bank to hold rates elevated until at least the final quarter of 2024 as it continues to battle inflation:
- like AUD against EUR, CNH, USD