A summary of a note from UBS on the dollar. UBS touch on the many alternatives being offered up right now.
- Fed’s July meeting minutes suggest a strong likelihood of a rate cut in September
- the minutes said that most participants believe US inflation is nearing the 2% target
- concerns over a slowing labor market are increasing
- the BLS data on Wednesday showing hefty revisions in payrolls adds to the pressure for rate cuts
- the growing US federal deficit is expected to be a major issue, regardless of the outcome of the presidential race
- Congressional Budget Office projects that interest costs on US debt will surpass defense spending this year, potentially weakening the US dollar over time
The picture elsewhere:
- other major central banks are expected to cut rates less aggressively than the Fed
- Swiss National Bank is likely nearing the end of its rate cuts, Swiss franc anticipated to rise
- Reserve Bank of Australia may not ease until next year, Australian dollar presents investment opportunity
- Bank of England and the European Central Bank are also taking a more gradual approach to rate cuts, which could lead to a depreciation of the US dollar against other currencies
- gold prices are anticipated to rise
