UBS turns more bullish on US dollar, sees euro and yen weakening further
UBS has raised its US dollar forecasts against major currencies, expecting the euro to fall to 1.12 and the yen to slide to 165 per dollar by end-2026, driven by higher US interest rate expectations and resilient economic fundamentals.
UBS has turned more bullish on the US dollar, forecasting further weakness in the euro and Japanese yen through the second half of 2026. The bank revised its end-2026 EUR/USD forecast to 1.12 from 1.14, and now expects the dollar-yen pair to reach 165 by both the third quarter and year-end.
The revised outlook reflects a repricing of US interest rate expectations and anticipation of additional Federal Reserve tightening. UBS argues that higher US rates, combined with resilient economic fundamentals, will continue to support dollar demand. For currency traders, this suggests a sustained dollar advantage in carry trades and a widening interest rate differential between the US and other major economies. The dollar's strength is likely to keep pressure on euro and yen pairs, with the Bank of Japan's cautious stance and the European Central Bank's potential rate cuts further weighing on their currencies. For real-time pricing on these pairs, check NowPrice's forex page.
Looking ahead, traders will focus on upcoming US economic data, particularly inflation and employment figures, which could influence the Fed's policy path. Any signs of easing inflation might temper dollar gains, while stronger data could reinforce the bullish outlook. Key levels to watch include EUR/USD support at 1.10 and dollar-yen resistance near 165. Central bank meetings in Japan and Europe will also be critical for near-term direction.