A rise in the value of the euro since the start of this year, which has surprised some, is unlikely to persist for much longer, the Swiss bank has reportedly argued.
UBS Wealth Management, which predicted at the start of this year that the euro would appreciate, now thinks this process has run its course, Bloomberg has quoted the firm as saying.
As 2017 got under way the euro looked potentially vulnerable to further declines versus the dollar, but the European single currency has defied sceptics to flourish. Much-touted corporate tax reforms in the US, for example, which had been cited as a reason to be bullish on the dollar, haven't yet materialised, while the eurozone economy has picked up. This, in turn, has encouraged thoughts that the European Central Bank may start to turn off the taps of money printing, aka quantitative easing.
“At the start of the year, dollar mania was the rage, and now “europhoria” has taken over as markets have come around to the view that the ECB will start to reduce bond purchases early in 2018,” Mark Haefele, the global chief investment officer at UBS Wealth Management, was quoted as saying. “But the bulk of the euro rally may now be over, at least for the next few months.”
Bloomberg also reported that Haefele said there is a possibility the dollar could rebound in the short term if the US passes a tax-reform package or raises its debt ceiling without any incidents.
UBS WM, which recommends that investors should hold a neutral position on the euro against the dollar, predicts the currency will trade at $1.18 in six months.
According to economists surveyed by Bloomberg on Monday, only 21 out of 109 have forecast the euro will trade at $1.20 or higher by the end of the year.