UBS has projected that the EUR/USD currency pair will experience volatility, with a potential increase above 1.10 and reaching 1.16 by 2025.

The Impact of the US Election

The upcoming US election introduces short-term risks to this outlook, particularly if there is a Trump victory. However, a second Trump administration may not be entirely beneficial for the US dollar due to potential tariffs impacting US GDP and consumer spending.

In contrast, the recent performance of the US dollar has shown a recovery, attributed to strong labor market reports and robust PMI data.

Response of the European Central Bank

The European Central Bank has responded to lower-than-anticipated inflation by cutting interest rates.

UBS maintains a positive outlook for the European economy and believes that any positive economic data could significantly influence the euro's value.

UBS Forecast and Recommendations

UBS suggests that the likelihood of the exchange rate climbing is greater than it falling, aligning with their forecast of a gradual strengthening of the euro against the dollar.

Investors are advised to remain vigilant and consider strategic moves to capitalize on fluctuations in the USD's strength.