UBS has left its EUR/USD forecasts unchanged,
- projecting 1.23 by end-2025 and 1.18 for 2026.
- The bank expects persistent softness in U.S. labour markets and a series of Federal Reserve rate cuts to weigh on the dollar over the coming year.
UBS economists forecast an additional 75bps of Fed easing in 2025—more than markets currently price in—helping compress rate differentials. They also flagged the potential nomination of a new Fed Chair as a factor that could open the door to deeper cuts in 2026, possibly pushing the 1-year forward 1-year U.S. rate below 3%.
Still, UBS sees dollar weakness running out of momentum by late 2025, expecting the U.S. economy to surprise on the upside in 2026 thanks to fiscal measures and deregulation. This would allow the greenback to recover, against a consensus view for a prolonged downtrend.
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