BNP Paribas FX Strategist on Fed, Dollar, and AI Bubble Risk (with Annabelle Droulers)

Yields cautious down , short term, interviewee explicit

explicit

NDX

RUT

Oil

Metals

USD sideways , medium term, interviewee explicit

explicit

BNP Paribas 8.5
Investment Bank $600.00B
Parisha Saimbi 7.0

BNP Paribas FX Strategist on Fed, Dollar, and AI Bubble Risk (with Annabelle Droulers)

dxy

the outlook for the dollar next year is going to be more of a balanced one... The broad path of dollar Asia then we think will be relatively stable chopping around perhaps in plus minus 2% moves from current spot levels. Balanced outlook due to resilient US activity supporting risk, but carry trades causing underperformance vs. high-yielders and resilience vs. low-yielders, leading to choppy, rangebound trading.

9 calls

+0

no reliable edge (random outcomes)

12/1/2025 1:30:08 PM	medium term cautious down	20 days later	-1.08%	+0.54%
9/2/2025 8:43:37 AM	medium term cautious down	20 days later	-0.90%	+0.45%

yields

we're finally only expecting one more cut in December this year and one in March for next year. Based on the view that persistent inflation risks will prevent more aggressive easing, implying a gradual, cautious downward path for yields.

12 calls

-3

no reliable edge (random outcomes)

12/1/2025 1:30:08 PM	medium term cautious down	20 days later	+2.03%	-1.02%
11/18/2025 10:02:58 AM	medium term down	20 days later	+1.28%	-1.28%
10/31/2025 1:03:58 PM	medium term cautious up	21 days later	-1.66%	-0.83%
9/2/2025 8:43:37 AM	medium term cautious down	20 days later	-2.16%	+1.08%
8/26/2025 9:07:48 AM	short term down	6 days later	+0.92%	-0.92%

Show all 5 yields results

You've removed one cut from your Fed projections. What's behind that?

Annabelle Droulers
Parisha Saimbi

We think the US may face a risk of persistent above-target inflation in 2026 and 2027. While data shows a slowdown now, that inflation risk remains and will prevent the Fed from delivering too many cuts next year. We expect one more cut in December and one in March.
What does that mean for the direction of the dollar and its impact on Asian currencies?

Annabelle Droulers
Parisha Saimbi

The dollar outlook is more balanced. Resilient US economic activity supports a risk-positive environment. FX investors will favor carry strategies, so the dollar may underperform against high-yielding EMs but stay resilient against low-yielding Asian currencies. We see stable, choppy trading for dollar/Asia.
On carry trades, what do you expect for the Japanese Yen with the BOJ meeting coming up?

Annabelle Droulers
Parisha Saimbi

We think dollar/yen could head slightly higher to around 160. The BOJ will deliver hikes, but the Fed will deliver fewer cuts than priced, and the BOJ fewer hikes than the economy needs. Inflationary pressures in Japan and US re-acceleration risks keep yen weak, supported by carry trades.
If the AI bubble bursts, what's the impact and does it change your easing cycle projections?

Annabelle Droulers
Parisha Saimbi

An AI bubble burst is a key risk. The Fed would have space to deliver aggressive rate cuts in response, leading to a shallow, short-lived recession. It would be negative for the dollar as safe-haven flows could benefit the Euro, which we see as the new safe haven in that scenario.
Elaborate on your non-consensus Euro view.

Annabelle Droulers
Parisha Saimbi

We think Euro/dollar is heading higher towards 1.20. Fiscal policy will support Eurozone growth, and the next leg for the ECB will be a hike in 2027. Tail risks like Fed independence concerns or an AI crash would benefit the Euro.

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