US Dollar: Gradual depreciation path outlined – BNP Paribas
BNP Paribas economists expect the US economy to grow above potential in 2026, with Gross Domestic Product (GDP) at 2.4% and inflation overshooting at 3.5%. They see the Fed Funds target range steady at 3.5%-3.75% as the Federal Open Market Committee (FOMC) adopts a two-sided outlook. In FX, economists project a gradual US Dollar (USD) depreciation versus the Euro (EUR) and stabilization against the Japanese Yen (JPY) and Pound (GBP).
Fed steady as Dollar seen softening
"We expect the Fed Funds target range to remain steady at 3.5% - 3.75%, with a FOMC shifting to a ‘two-sided outlook’, signaling equal readiness to implement rate hikes or cuts if warranted."
"In our base-case scenario (gradual normalisation of the Middle East situation with persistent price tensions), we expect the USD depreciation against the EUR to resume, albeit very gradually, amid broader diversification away from the dollar."
"We forecast EUR/USD to reach 1.21 by Q4 2026 and 1.25 by Q4 2027."
"We anticipate stabilisation of the yen and the GBP against the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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