UBS maintains EUR/USD forecast at 1.23 for end-2025 amid Fed rate cut expectations - Investing.com Canada
At a Glance
The desk maintains a bullish outlook on the EUR/USD, aligning with UBS's forecast of 1.23 by the end of 2025, driven by anticipated Federal Reserve rate cuts. Per the full note , the expectation of a dovish pivot from the Fed is a key factor supporting this view. The desk highlights that a weaker dollar, stemming from these rate cuts, could bolster the euro's value against the USD. With no high-impact events on the calendar in the coming month, the focus remains on macroeconomic indicators and central bank communications that could influence market sentiment.
Key Takeaways
- 01UBS maintains EUR/USD end-2025 forecast at 1.23, aligning with consensus and expecting Fed rate cuts.
- 02Consensus median Dec26 target is 1.22, with a range of 1.16–1.25; UBS sits near the upper end.
- 03Morgan Stanley is a notable bear with a Dec26 target of 1.16, highlighting firm-level divergence.
Full Analysis
What the desk is arguing
UBS maintains its EUR/USD end-2025 forecast at 1.23, driven by anticipated Fed rate cuts that should weaken the USD. The bank sees the pair appreciating from current spot levels around 1.15, roughly 7% above today's price. This thesis hinges on the Fed easing more aggressively than the ECB, narrowing interest rate differentials in favor of the euro.
Supporting evidence includes the consensus median Dec26 target of 1.22, which is only slightly below UBS's forecast. Recent revisions from major banks have been broadly bullish, with Goldman, ING, MUFG, and Deutsche Bank all targeting Dec26 levels between 1.22 and 1.25. The market appears to be pricing in gradual EUR appreciation, consistent with UBS's view that cyclical and policy factors favor the euro.
By maintaining this forecast, UBS implicitly rejects the bearish scenario where USD strength persists. This stance runs counter to Morgan Stanley's Dec26 target of 1.16, implying that UBS sees current headwinds as temporary and expects a sustained USD weakening trend.
Market Implications
UBS's bullish EUR/USD stance suggests a strategic bias to buy dips in the pair, particularly if Fed rate cut expectations accelerate. Given consensus alignment, EUR/USD options upside skew may persist. If the Fed cuts more than expected, EUR/USD could rally toward 1.25, but if inflation proves sticky, the pair may stall near 1.20.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
From the original
UBS maintains EUR/USD forecast at 1.23 for end-2025 amid Fed rate cut expectations Investing.com Canada
Related speeches
4 itemsUBS kept its EUR/USD forecasts at 1.23 for end-2025 and 1.18 for 2026, citing Fed cuts - investingLive
UBS's decision to maintain its EUR/USD forecasts at 1.23 for end-2025 and 1.18 for 2026 places them in a bullish stance on the euro, largely driven by anticipated Federal Reserve rate cuts. This perspective aligns with a broader sentiment among certain firms, many of which project gradual appreciation of the euro against the dollar in the coming years. However, UBS's projections are notably higher than what the consensus suggests, indicating a potential divergence in views on the euro's strength.
UBS kept its EUR/USD forecasts at 1.23 for end-2025 and 1.18 for 2026, citing Fed cuts - investingLive
UBS maintains its EUR/USD forecast, projecting levels of 1.23 for the end of 2025 and 1.18 for 2026, attributing these figures to anticipated Federal Reserve interest rate cuts. This positioning seems grounded in a belief that easing US monetary policy will bolster the euro against the dollar over the medium term, despite the current spot rate being significantly lower.
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