Gold prices slip as stronger dollar, Fed rate uncertainty weigh
Investing.com - UBS has revised its U.S. dollar forecasts upward, now projecting the EUR/USD at 1.18 and USD/JPY at 152 by year-end, followed by 1.14 and 152 respectively by the end of 2026.
The Swiss banking giant still anticipates some near-term downside risks for the dollar once weaker U.S. labor market data validates further Federal Reserve interest rate cuts. UBS expects a dollar recovery next year, citing several factors including strong equity markets, U.S. artificial intelligence exceptionalism, and tax cuts.
UBS also noted that diminished risk premia for "FOMC re-composition risk" would contribute to the dollar’s strength in the coming year. This forecast represents an upward revision from the bank’s previous dollar projections.
The Bank of Japan held its monetary policy unchanged last week, a decision UBS believes will maintain upward pressure on the USD/JPY exchange rate as long as equity markets remain buoyant. The bank sees a potential move toward 155 for the USD/JPY pair.
UBS cautioned that at these elevated levels, market participants should be alert to possible official intervention rhetoric from Japanese authorities, as well as risks to global market sentiment that could affect the currency pair.
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