Wells Fargo Raises Dollar Targets, Cuts Euro and Yen Outlook Through 2027

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Wells Fargo Investment Institute on Tuesday revised its currency forecasts, projecting additional U.S. dollar strength through the end of 2027 as inflation-driven Federal Reserve rate increases widen interest rate gaps with other developed economies. The firm raised its dollar/euro target to $1.10-$1.14 from a previous range of $1.17-$1.21 for year-end 2027, moved its yen/dollar target to ¥160-¥164 from ¥158-¥162, and lifted its ICE U.S. Dollar Index target to 100-104 from 95-99. Wells Fargo analysts expect the Fed to deliver a full percentage point more in rate hikes into 2027, while the European Central Bank and other central banks are projected to hold rates steady or cut them as their earlier increases slow economic growth next year. The revision follows the August Producer Price Index report showing elevated inflation and the Fed's September 16 rate hike, with interest rate futures markets showing expected U.S. short-term yields outpacing comparable eurozone rates from September 1 through September 24. The analysts said wider rate differentials between the U.S. and other developed economies should attract international investors, and that the U.S. economy can withstand higher borrowing costs, giving the dollar an edge over other currencies.

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Wells Fargo Investment Institute's revised forecasts project a stronger dollar, supporting its own FX outlook franchise

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