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Investing.com - UBS has revised its EUR/USD forecast to 1.20 from March through December 2026, down from previous projections of 1.22 in March and 1.23 in June and September, the bank announced Wednesday.
The Swiss banking giant expects the euro to move toward the 1.20 level in coming months, supported by softer U.S. economic data following the end of the government shutdown, which should allow the Federal Reserve to continue its easing cycle. Fed rate cuts amid rising inflation are expected to push U.S. real rates into negative territory.
UBS attributes the euro’s recent lack of momentum to ongoing political uncertainty in France, which has kept international investors cautious on the common currency.
The bank’s forecast reflects a balance between anticipated end of U.S. dollar weakness and the resolution of European political risks.
The European Central Bank is likely at the end of its easing cycle, while the Federal Reserve is expected to reach the end of its easing cycle by mid-2026, according to UBS analysis. Fiscal stimulus in both the U.S. and Europe is expected to support economic growth during this period.
The 1.20 exchange rate represents an equilibrium that assumes no major surprises from either the U.S. or European economies, the bank noted in its currency outlook report.
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