Bank of America prefers the decline of the US dollar and the rise of the pound sterling during the coming period and the bank's forecasts for most major currencies were as follows:
US Dollar: bearish
The bank expects the US dollar to weaken in the medium term as a result of the expected interest rate cuts from the Federal Reserve as well as the slowdown in US growth.
But the outlook is fairly balanced as a significant amount of these cuts have already been priced by the market, as the risks include the possibility of the Fed easing interest rates at a slower pace than expected, as well as uncertainty about the upcoming US elections, which may affect the US dollar in either direction.
European euro:Bullish
Bank of America expects a rise in the value of the euro against the US dollar, the pair is expected to rise at the end of the year to levels of 1.12, the bank is based in its view on expectations of low inflation in the United States to support interest rate cuts by the Fed, the euro is expected to perform better against the Swiss franc and the Canadian dollar due to the ECB policy as a result of this interbank monetary policy difference so far, however, it is cautious about the economic data of the eurozone, especially in connection with the weaker performance in the third quarter.
Japanese yen: bearish
The bank adheres to a bearish view of the Japanese yen, and expects the USD/JPY pair to reach 155 by the end of the year, although the dollar is also weakening, Bank of America forecasts that the yen will be the weakest, driven by carry trades and structural Japanese outflows, as Japanese investors continue to look for higher yields abroad. Despite the potential risks from global geopolitical tensions, fundamental factors are expected to keep the yen under pressure.
Pound sterling: bullish
The Bank of America expects the British pound to strengthen its strength, especially against the Swiss franc, the bank also highlights the improvement of economic data in the UK, which is in line with the expectations of a shallow easing cycle by the Bank of England, with a possible cut in interest rates next November, as the pound is also expected to benefit from the economic flexibility of the UK over the coming period.
Australian Dollar: Bullish
The Australian dollar is one of the bank's preferred commodity currencies over other currencies such as the New Zealand dollar and the Canadian dollar, with expectations of continued strength due to supportive global risk sentiment. The Reserve Bank of Australia is expected to maintain a stable policy unchanged, which the bank expects to further support the Australian dollar against the dollar, Swiss franc and other commodity currencies.
