UBS has projected that the EUR/USD currency pair will reach 1.16 by the end of 2025, with a gradual ascent above the 1.10 mark.

Despite the potential for short-term fluctuations, particularly influenced by the upcoming US election, UBS remains optimistic about the euro's performance. The bank suggests that the current pessimistic sentiment surrounding the European economy may lead to significant reactions to positive economic data.

The recent recovery of the US dollar has been attributed to stronger-than-expected labor market reports and robust PMI data from the United States. The Federal Reserve's future actions will be closely tied to forthcoming labor market reports, but external factors such as the impact of Hurricane Milton could complicate the interpretation of these reports.

The US election is expected to have a significant impact on the currency markets. UBS indicates that a second term for President Trump may not bode well for the USD due to potential adverse effects on US GDP and consumer spending. In contrast, UBS maintains a positive outlook for the euro in the European context, forecasting a recovery in growth by 2025.

The bank suggests that the European Central Bank's recent decision to lower interest rates may create an environment conducive to euro appreciation. UBS advises investors to reassess their USD exposure, particularly during periods of USD strength, and remain vigilant and adaptable in their investment strategies.

The interplay between economic indicators, geopolitical events, and market sentiment will continue to be crucial in determining the trajectory of the EUR/USD pair. Investors are urged to stay informed and consider the broader implications of these developments on their portfolios.