Economists at BNP Paribas discuss the USD outlook against the EUR and JPY.

Dollar to weaken somewhat versus the Euro

“We expect the Dollar to weaken somewhat versus the Euro. The USD's valuation is expensive, positioning in the market is very long and the long-term interest rate differential should narrow.”

“The Yen has already weakened significantly versus the Dollar, reflecting the increased policy divergence between Fed and BoJ. We expect USD/JPY to remain around current levels in the near term. In 2023, the Yen should strengthen versus the Dollar considering that the federal funds rate should have reached its terminal rate.”