UBS maintains EUR/USD forecast at 1.23 for end-2025 amid Fed rate cut expectations - Investing.com Canada
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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
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.
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.
Risks to this view
Upside risks to USD: delayed Fed cuts due to sticky inflation, or a hawkish surprise from the ECB, could strengthen USD. Downside risks to EUR: renewed geopolitical tensions, energy price spikes, or a sharp slowdown in eurozone growth could cap EUR gains. A global risk-off event would likely lift USD and weigh on EUR/USD.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
Sources & References
How we cover this story
Related news on this pair
Euro struggles as French fiscal concerns and firm US Dollar dominate
French fiscal deterioration coupled with USD strength narrows EUR/USD support; monitor French bond spreads for contagion risk to broader eurozone credit.
EUR/USD Weekly Forecast: US Dollar persistent demand hints at a test of 1.1000
Persistent USD demand signals potential EUR/USD downside to 1.1000, suggesting dollar strength may be structurally underpinned rather than tactical.
EUR/USD Price Forecast: Rallies fail above 1.1200 amid high Oil prices, debt woes
EUR resistance failure at 1.1200 combined with Eurozone debt concerns suggests structural headwinds for EUR/USD near-term; elevated oil prices add stagflation risk to ECB policy calculus.