BofA says investors should stay long USD into Q3 – Money News
Investing.com — Bank of America stays bullish on the U.S. greenback into the third quarter, citing resilient U.S. financial growth, expectations for extra Federal Reserve fee hikes, and continued help from artificial intelligence-driven investment.
The bank maintained its suggestion to stay long the greenback and short the euro. It forecasts EUR/USD to fall to 1.12 within the third quarter earlier than ending 2026 at 1.15, down from its earlier forecast of 1.20.
The strategists anticipate three Fed fee hikes this yr, which they consider will widen rate of interest differentials in favor of the dollar.
They stated the narrowing hole between U.S. financial efficiency and the remaining of the world has already supported the greenback. Additional positive aspects are potential if the U.S. economic system continues to outperform.
The word stated short-term elements corresponding to tax refunds, wealth results, and the FIFA World Cup have supported growth this yr. Over the long term, AI-related investment is predicted to stay an important financial driver.
Lower vitality costs may additionally present help to different main economies, although the analysts anticipate that benefit to turn out to be more evident subsequent yr.
The bank additionally revised its outlook on the Japanese yen, abandoning its long-held bearish stance. It now favors promoting CHF/JPY, citing enhancing balance-of-payments dynamics, stronger AI-related exports, and rising inward investment.
On trading methods, the analysts proceed to favor selective carry trades, notably AUD/CHF and USD/CHF. They additionally cautioned that seasonal patterns turn out to be much less supportive during August, when international exchange volatility sometimes will increase.
Looking forward, the staff expects currency volatility to rise into the U.S. midterm elections later this yr. It stated GBP/USD volatility seems comparatively cheap and will benefit from election-related uncertainty.
The strategists added that stronger U.S. growth and a more hawkish Federal Reserve may proceed supporting each the greenback and broader international exchange volatility.
Among the up to date year-end forecasts, the bank initiatives GBP/USD at 1.37, USD/JPY at 152, AUD/USD at 0.71, and NZD/USD at 0.59. It additionally maintained a constructive medium-term view on sterling and the Australian and New Zealand {dollars}.
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