USD: Gradual depreciation outlook – BNP Paribas

💡 DMK Insight

BNP Paribas’ forecast of a weakening Dollar is a big deal for traders right now. With the US economy projected to grow above potential and inflation likely to overshoot due to tariffs, this could lead to a shift in monetary policy. If the Fed keeps the Funds target range at 3.5%-3.75% through 2026, it suggests a prolonged period of low interest rates, which typically weakens the Dollar. Traders should watch how this affects USD pairs, especially against currencies like the Euro and Yen, which could gain traction. Additionally, commodities priced in Dollars might see increased volatility as a weaker Dollar often boosts their prices. But here’s the flip side: if inflation continues to rise, the Fed might be forced to act sooner than expected, which could lead to a sudden Dollar rally. Keep an eye on inflation metrics and Fed communications for any signs of a policy shift. Watch for key levels in USD pairs, particularly if the Dollar approaches recent lows, as that could signal a buying opportunity for those looking to capitalize on a potential rebound.