Economists at BNP Paribas Research revise their targets on EUR/USD and USD/JPY as they expect the Dollar to embark on a bearish trend.
A multi-year bearish trend in the USD is underway
“We expect USD strength to ultimately prove short-lived. Indeed, we believe a multi-year bearish trend in the USD is underway, with portfolio flows turning increasingly negative for the currency.”
“Yields turning positive in Europe and Japan could spur repatriation by local investors; we note they have accumulated significant US fixed income exposure since 2014. With evidence of these repatriation flows appearing, we revise our USD forecasts lower and now project EUR/USD to rise to 1.14 by end-2023 and USD/JPY to decline to 121.”
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BNP Paribas recently announced its predictions for the exchange rate by the end of the year. According to the French bank, the Euro to US Dollar exchange rate is expected to reach 1.14 while the US Dollar to Japanese Yen rate will sink to around 121.
BNP Paribas has revised its predictions for EUR/USD following the circulation of the announcements made by the US Federal Reserve. The bank believes that the latest Federal Reserve announcements, which suggest that the US leaderships allows inflationary overshoot while keeping policy rate low, will determine a higher pressure against the US Dollar.
The bank also believes that recent events in the geopolitical arena, especially the US-China trade negotiations, will continue to weigh on the demand for riskier assets, leading to a possible dive in the Japanese Yen against its US counterpart.
The French bank believes that the Euro to US Dollar exchange rate will benefit from better macroeconomic data coming from the Eurozone. According to the bank, future macroeconomic data should be strong enough to keep the EUR/USD at a steady level.
The EUR/USD exchange rate is currently trading around 1.11. Moreover, the USD/JPY is trading around 123.
BNP Paribas makes its predictions based on a year-end analysis that uses economic data from the past, present and future. The bank’s main goal is to maximize returns for its investors and make sure that the best options are being taken when it comes to currency markets.
