UBS maintains EUR/USD forecast at 1.23 for end-2025 amid Fed rate cut expectations - Investing.com Canada

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.