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Investing.com - UBS predicts the euro will strengthen against the U.S. dollar, targeting 1.20 as the year progresses, following a period of consolidation in July after strong performance earlier in the year.
The recent U.S.-European trade deal, despite imposing higher-than-expected 15% tariffs and lacking European countermeasures, has reduced uncertainty for European companies, allowing them to better plan investments for upcoming quarters, according to UBS analysis.
The European Central Bank’s 250 basis points of rate cuts over the last five quarters, combined with anticipated fiscal support across Europe—particularly in Germany—reinforces the ECB’s decision-making and should continue to favor a stronger euro versus the dollar over UBS’s forecast horizon.
UBS recommends increasing U.S. dollar hedge ratios or establishing outright long EUR/USD positions at current levels below 1.16, while also suggesting that euro investors consider hedging Swiss franc exposure as the euro is expected to outperform the franc over the next 12 months.
For active long exposure, UBS identifies the Norwegian krone, Swedish krona, and Australian dollar as presenting the biggest opportunities, with the Norwegian krone and Australian dollar offering attractive carry against the euro that the Swedish krona does not provide.
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