US dollar strength to fizzle, FX forecasters unmoved by searing rally
UUP•FX strategists polled on September 30-October 2 expected the dollar to give up most of its recent gains over the coming year, despite an over 3% rally since early September. Median forecasts put the euro at $1.16 in a year, while 80% said the dollar was more likely to beat than miss their three-month forecasts.
1. Forecasters hold bearish view
Nearly 70 FX forecasters made only minor revisions to their long-held view that the dollar will weaken over the coming year. Their median forecast put the euro at $1.14 in a month, $1.15 in three and six months, and $1.16 in a year.
2. Rate expectations drive debate
The dollar has gained more than 3% since early September, supported by expectations for Federal Reserve rate hikes and a sell-off in Treasuries. Eighty percent of forecasters said the dollar was more likely to beat than fall short of their three-month forecasts. Some strategists expect further dollar strength if markets anticipate more Fed hikes, while others expect weakness over a six-month to one-year horizon.
