Dollar Poised to Rally to 105 Amid AI-Driven Growth Outperformance
BCA Research has upgraded its target for the US dollar to 105 in the next three months, citing resilient domestic data and a widening real-rate gap favoring the Greenback. The firm's FX Strategist Artem Sakhbiev notes that the global industrial cycle, driven by AI capex, is at its strongest pace since 2021.
The US economy is outperforming other major economies, particularly in terms of growth, according to BCA. Global data center construction is expected to top $1 trillion next year, with the US pipeline exceeding the rest of the world combined. Recent PMI figures show US output pulling ahead at five-year highs across both manufacturing and services.
BCA also points out that the US economy is better insulated against high energy costs and elevated interest rates compared to European and Asian peers. This growth differential is expected to keep market expectations for additional Federal Reserve policy tightening intact, with around 75 basis points of rate hikes anticipated.