UBS looks to fade rallies in the US dollar, move into other G10 currencies

A summary of a note from UBS on the dollar. UBS touch on the many alternatives being offered up right now.

• Fed’s July meeting minutes suggest a strong likelihood of a rate cut in September
• the minutes said that most participants believe US inflation is nearing the 2% target
• concerns over a slowing labor market are increasing
• the BLS data on Wednesday showing hefty revisions in payrolls adds to the pressure for rate cuts
• the growing US federal deficit is expected to be a major issue, regardless of the outcome of the presidential race
• Congressional Budget Office projects that interest costs on US debt will surpass defense spending this year, potentially weakening the US dollar over time

The picture elsewhere:

• other major central banks are expected to cut rates less aggressively than the Fed
• Swiss National Bank is likely nearing the end of its rate cuts, Swiss franc anticipated to rise
• Reserve Bank of Australia may not ease until next year, Australian dollar presents investment opportunity
• Bank of England and the European Central Bank are also taking a more gradual approach to rate cuts, which could lead to a depreciation of the US dollar against other currencies
• gold prices are anticipated to rise

This article was written by Eamonn Sheridan at www.forexlive.com.