UBS lowers EUR/USD forecast to 1.20 for 2026 on political risks By Investing.com - Investing.com South Africa

What the desk is arguing

The desk believes that while UBS's caution regarding potential political instability in the Eurozone is valid, the consensus among top financial institutions suggests a more favorable outlook for EUR/USD. Recent consensus targets indicate a believed stability and eventual appreciation of the Euro against the dollar, driven by factors like interest rate differentials and economic recovery prospects.

Additionally, the current spot of 1.1500 is well below the consensus forecast averaging around 1.2050 for mid-2026. The continued optimism from other banks implies that UBS's forecast reflects a more conservative interpretation of the market, potentially overlooking underlying economic recovery strengths.

Where it sits in our coverage

The current consensus target for the EUR/USD stands at 1.2050 for mid-2026, with firms projecting a range of 1.1700 to 1.2500. UBS's projection at 1.20 marks a notable divergence from this general outlook, particularly as other firms forecast values above the current spot rate, indicating a potential undervaluation of the Euro in light of anticipated macroeconomic factors.

Notably, firms like JPMorgan, Goldman Sachs, and Deutsche Bank reflect this bullish sentiment with their December 2026 forecasts:

• JPMorgan: 1.2000
• Goldman Sachs: 1.2500
• Deutsche Bank: 1.2500

How other firms see it

Among institutions holding a more optimistic view, firms such as Goldman Sachs, JPMorgan, and Deutsche Bank align with the belief that the Euro will appreciate against the dollar, reflecting confidence in the Eurozone's economic recovery.

• Goldman Sachs: Targeting 1.2500 for Dec-26
• JPMorgan: Targeting 1.2000 for Dec-26
• Deutsche Bank: Targeting 1.2500 for Dec-26

In contrast, UBS stands as a cautious outlier with its revised forecast, underscoring concerns related to political instability, which could risk overshadowing the Euro's potential upside in coming years.