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18 Mar 2013
Forex Flash: EUR/USD downgraded to 1.2000 by year-end – UBS
FXstreet.com (Barcelona) - According to the UBS Research Team, “This year we expect the euro to trade back to 1.2000 against the dollar by year end as America's economy outperforms, the Federal Reserve starts scaling back its asset purchases in the second half of the year, foreign central bank and sovereign wealth fund managers desist from dollar diversification and America's shale energy boom cuts the US current account deficit.”
However, we had expected this year's range so far in the euro of 1.30-1.3700 to remain intact into Q2 2013. First, as the Fed continues to buy $85bn a month of portfolio assets. Second, as the Eurozone debt crisis had been subdued by last year's European Central Bank commitment to buy government bonds in the secondary markets of Eurozone countries borrowing funds from the European Stabilization Mechanism.
Italy's elections and now Cyprus' prospective action against deposit-holders suggest the Eurozone debt crisis is set to weigh on the euro again even before the Fed starts to temper its quantitative easing. The news from Cyprus in particular has shown once more how ad hoc decision-making by policymakers regarding one country of the single currency area has the potential to adversely affect sentiment in other vulnerable Eurozone members. “As a result we downgrade our one and three month EUR/USD forecasts from 1.3700 and 1.3000 respectively to 1.3000 and 1.2800 while keeping our end year forecast of 1.2000.” they add.
However, we had expected this year's range so far in the euro of 1.30-1.3700 to remain intact into Q2 2013. First, as the Fed continues to buy $85bn a month of portfolio assets. Second, as the Eurozone debt crisis had been subdued by last year's European Central Bank commitment to buy government bonds in the secondary markets of Eurozone countries borrowing funds from the European Stabilization Mechanism.
Italy's elections and now Cyprus' prospective action against deposit-holders suggest the Eurozone debt crisis is set to weigh on the euro again even before the Fed starts to temper its quantitative easing. The news from Cyprus in particular has shown once more how ad hoc decision-making by policymakers regarding one country of the single currency area has the potential to adversely affect sentiment in other vulnerable Eurozone members. “As a result we downgrade our one and three month EUR/USD forecasts from 1.3700 and 1.3000 respectively to 1.3000 and 1.2800 while keeping our end year forecast of 1.2000.” they add.