The economists at BNP Paribas Research have revised their targets on EUR/USD and USD/JPY as they anticipate the Dollar to embark on a bearish trend. The team believes that this bearish trend in the USD is a multi-year one and that portfolio flows will become increasingly negative for the currency. This is due to the fact that yields in Europe and Japan are turning positive and this could lead to repatriation of funds by local investors.
The BNP Paribas Research team has noted that local investors have been accumulating significant US fixed income exposure since 2014 and evidence of these repatriation flows is beginning to appear. As a result, the team has revised their USD forecasts lower and now project that EUR/USD will reach 1.14 by the end of 2023 and USD/JPY will decline to 121.
The bearish trend in the USD is part of a larger trend that is taking place in the global economy. The US Dollar has been a safe haven currency for many investors in recent years, but this is beginning to change as the global economy is slowly recovering from the effects of the pandemic. With interest rates in Europe and Japan turning positive, investors are now looking to invest their funds in these regions instead of the US. This is leading to a weakening of the US Dollar and a strengthening of the Euro and Japanese Yen.
The weakening of the US Dollar is also having an effect on international trade. Countries that are heavily reliant on exports to the US are now seeing their exports decline as the US Dollar weakens. This is leading to a decrease in demand for their goods and services, which is having a negative effect on their economies.
The US Dollar is also having an effect on global stock markets. As the US Dollar weakens, investors are now looking to invest in other markets that are not as reliant on the US Dollar. This is leading to a decrease in demand for US stocks and a corresponding increase in demand for stocks in other markets.
The weakening of the US Dollar is also having an effect on the price of commodities. As the US Dollar weakens, the prices of commodities such as oil and gold are increasing as investors are now looking to invest in these markets instead of the US Dollar. This is having a positive effect on the global economy as it is leading to an increase in demand for commodities.
Overall, the BNP Paribas Research team believes that the bearish trend in the US Dollar is a multi-year one and that it will continue to have an effect on the global economy. The team is expecting EUR/USD to reach 1.14 by the end of 2023 and USD/JPY to decline to 121. This bearish trend in the US Dollar will lead to a decrease in demand for US goods and services, a decrease in demand for US stocks, an increase in demand for stocks in other markets, and an increase in demand for commodities. All of these factors will contribute to a weakening of the US Dollar and a strengthening of the Euro and Japanese Yen.