Key Takeaways:
Dollar strength projected to continue against G-10 peers like the euro, Canadian dollar, and yen
Interest rate convergence expected to increase euro’s appeal as a funding currency
Eurozone political outlook remains uncertain, with risks from German elections
US tariffs pose a threat to euro area economy
UBS predicts EUR/USD to end 2025 at 0.990
Yen’s outlook linked to Bank of Japan policy changes, UBS forecasts USD/JPY at 150 by 2025
Analysis:
The financial landscape for major currencies like the dollar, euro, and yen is undergoing significant shifts and projections. We are witnessing a trend where the strength of the US dollar is expected to continue against its counterparts such as the euro, Canadian dollar, and yen. This can be attributed to various factors such as interest rate convergence, political uncertainties in the Eurozone, and the impact of US tariffs on the euro area economy.
In particular, the euro’s appeal as a funding currency is expected to increase due to interest rate convergence. However, the Eurozone’s political outlook remains uncertain, with risks stemming from events like the German elections. The threat posed by US tariffs further complicates the economic outlook for the euro area.
On the other hand, the Japanese yen’s future is closely tied to potential policy changes by the Bank of Japan. UBS forecasts the USD/JPY exchange rate to reach 150 by 2025, reflecting the evolving dynamics in the currency markets. Overall, these projections provide valuable insights into the potential trends and challenges that lie ahead for these major currencies.