**UBS Perspective on Major Currency Trends: Weekly Forex Market Outlook**
*Based on UBS’s analysis as reported by Eamonn Sheridan for ForexLive, with additional insights from major financial sources such as Bloomberg, Reuters, and analyst commentaries for a comprehensive overview.*
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**Overview**
As major global economies grapple with shifting monetary policies, inflationary trends, and divergent growth rates, the foreign exchange market continues to reflect an evolving landscape. This analysis distills UBS’s latest outlook across major currency pairs for the week ahead, offering in-depth insights into the drivers shaping the US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Swiss Franc (CHF), and Canadian Dollar (CAD), while supplementing with perspectives from additional reputable sources.
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**US Dollar (USD): Navigating Policy Expectations and Economic Data**
– **Current Trends and Influences:**
– The Dollar index (DXY) has traded in a narrow range as investors balance Federal Reserve outlooks with global macroeconomic uncertainty.
– UBS anticipates the USD to remain supported in the near term, citing continued US economic resilience and the preference for USD-denominated assets amid lingering market volatility.
– Recent data, including robust services PMI and employment figures, have reinforced the view that the Federal Reserve is in no hurry to implement aggressive rate cuts.
– **Key Drivers:**
– Market attention is fixed on forthcoming US CPI and PPI prints, as well as labor market updates.
– Geopolitical uncertainty and risk-off sentiment act as positive catalysts for the USD, given its status as a global reserve currency.
– Money market pricing still points to a start of the rate-cut cycle later in the year, but skepticism about the breadth and depth of cuts remains prevalent.
– **UBS Outlook:**
– Retain a constructive bias on USD performance until further clarity emerges on US policy and data trajectory.
– USD demand may persist, particularly against currencies with dovish central banks or weaker economic backdrops (e.g., JPY, CHF).
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**Euro (EUR): Facing Headwinds as Divergent Policy Paths Emerge**
– **Current Trends and Influences:**
– The EURUSD pair has been under modest pressure as signs of a slowing European economy and increased anticipation for European Central Bank (ECB) easing weigh on sentiment.
– **Key Drivers:**
– UBS observes that the ECB has signaled openness to rate cuts, with markets pricing in action as soon as June, based on softening inflation and subdued growth data.
– European manufacturing remains in contraction, and business sentiment surveys paint a cautious outlook.
– Political uncertainty in some member states adds another layer of risk.
– **UBS Outlook:**
– The bias remains skewed to the downside for the euro, particularly if US data continue to impress relative to the euro area.
– Any near-term rallies in EURUSD are expected to be capped by persistent growth divergence and monetary policy expectations
Read more on AUD/USD trading.