UBS On-Air: Paul Donovan Daily Audio 'Swap Shop'
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1800 |
ING | Neutral | 1.1700 |
Rabobank | Bullish | 1.1800 |
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US Treasury Secretary Bessent admitted “several” Gulf countries asked the US for dollar swap lines to cover short-term funding needs from the Gulf war. Where travel has collapsed, or where plunging oil and gas volumes are not offset by price effects, near-term economic support is
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4 itemsUBS On-Air: Paul Donovan Daily Audio 'Perceptions on the cost of war'
The desk contends that current US geopolitical uncertainty, particularly regarding the Gulf, is creating volatility in FX markets, especially in the USD pairs. Per the full note from UBS's Paul Donovan, conflicting statements from US officials about the Gulf conflict suggest that US economic stability, despite being touted as an oil exporter, is under threat due to potential emergencies that could require aggressive monetary policy responses. This ambiguity could further weaken the USD in the near term, influencing pairs such as EUR/USD and GBP/USD amidst rising oil prices and consumer apprehension, particularly as US consumers adjust their spending habits to cope with higher costs.
UBS On-Air: Paul Donovan Daily Audio 'Living in uncertain times'
The desk argues that current market volatility stems from conflicting messages coming from U.S. officials regarding their objectives in the Gulf War. This uncertainty complicates investors' ability to price risk accurately, as highlighted by UBS economist Paul Donovan, who notes that without clear objectives, progress—and thus the potential duration of the conflict—remains ambiguous. Market reactions have been observed as risk markets weakened following tensions between the U.S. and Iran, particularly surrounding the Strait of Hormuz. In light of this situation, traders should remain vigilant as the evolving geopolitical narrative continues to shape market conditions, especially in the wake of the weekend's incidents.
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