The US Dollar Index (DXY) is still down around 10% from its September 2022 peak. Economists at UBS continue to expect the US dollar to weaken against key counterparts over the next 6-12 months.

Position for renewed US Dollar weakness

“Any safe-haven boost to the USD from the debt ceiling impasse should be short-lived. We are confident Congress will come to an agreement and expect safe-haven inflows to reverse.”

“The US rate-hike cycle is nearing its end, while Europe still has room to go.”

“A reduction in the US yield carry and a reversal in Europe’s terms of trade should be key headwinds for the US Dollar in the second half of 2023. The market focus on potential interest rates cuts in the US toward year-end and in 2024 could intensify in the coming months and will likely push US yields down further. In addition, the Euro is benefiting from an improvement in the region's trade balance due to falling energy prices.”