Despite geopolitical tensions and oil shocks, currency markets remain unusually stable due to balancing macro factors. UBS maintains a long-term bearish view on the USD, favoring pro-cyclical laggards as energy prices normalize.
Key Takeaways
- 1.Currency market volatility remains unexpectedly low despite geopolitical conflict and rising oil prices, primarily due to offsetting market forces like narrowing yield advantages.
- 2.The US dollar is viewed as a 'sell-on-strength' candidate against commodity-linked and laggard currencies as energy prices are expected to normalize in the second half of 2026.
- 3.Selective opportunities are preferred in pro-growth currencies that have faced recent pressure, such as the Swedish krona (SEK), Australian dollar (AUD), and New Zealand dollar (NZD).
Table of Contents
- Currency markets
- A dormant currency market
- Investment considerations
- Key forecast changes
- Currency forecasts
- Global asset class preferences definitions
- Appendix
- Risk information
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Authors
Dominic SchniderConstantin Bolz
Securities
EURUSDUSDJPYWGBI
Themes
Energy-Driven FX VolatilitySelective Carry Trades
Regions
GlobalAsia PacificEuropeUnited StatesNorwayChina