UBS shared views on a possible path for the Euro, underscoring the importance of upcoming economic indicators over the European Central Bank (ECB) meeting held earlier this month a week.
The market has already absorbed at least 150 basis points of rate cuts from the ECB over the next 12 months, but UBS suggests that ECB President Christine Lagarde's press conference could introduce volatility, especially if it deals with the risk of future or negative US taxes. economic effects in France.
UBS expects more clues for the direction of the Euro to come from data later in December rather than the recent ECB meeting. In particular, the preliminary December PMI data due on December 16, and the French Insee survey scheduled for December 19, could affect market expectations.
Weakness in these positive indicators could lead to a reduction in inflation expectations going forward and market bets that could be more aggressive on ECB rate cuts.
The company has a short position on , indicating a bearish view on the Euro against the Japanese Yen. UBS also has a bearish stance on , citing no reason to deviate from market expectations for three 25 basis point rate cuts from the Bank of England in 2025.
UBS notes that unless there is a major external shock, such as a trade war, inflationary pressures within the UK economy could limit the ability to implement rate cuts.
UBS's long-term target for EURGBP remains at 0.8200, but they admit the pair could fall below this level.
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