UBS Predicts EUR/USD to Rise to 1.16 by 2025

UBS forecasts that the exchange rate between the euro and the US dollar will reach 1.16 by 2025.This expectation is based on a potential slowdown in the US economy, leading the Federal Reserve (FRB) to lower interest rates.While the European Central Bank (ECB) is also anticipated to reduce rates, its approach is expected to be more gradual compared to the FRB.Additionally, improvements in Europe’s trade balance are seen as supportive factors for the euro.These combined elements suggest a strengthening of the euro against the US dollar.

Explanation and Impact

If this prediction materializes, it implies an appreciation of the euro and a depreciation of the US dollar.For investors, assets denominated in euros may increase in value, while those in US dollars might relatively decrease.Moreover, companies engaged in export and import activities should be mindful of exchange rate fluctuations, as they can significantly impact profitability.

Explanation for Beginners

Exchange rates compare the value of two currencies.For instance, a forecast of 1 euro equaling 1.16 dollars indicates that the euro’s value is expected to rise relative to the US dollar.This is based on expectations of improved economic conditions in Europe and a slight slowdown in US economic growth.When considering investments, this anticipated rise in the euro’s value suggests that investing in euro-denominated assets might yield profits.However, since exchange rates fluctuate due to various factors, it’s essential to adopt a long-term perspective.