UBS has issued a significant forecast for the EUR/USD currency pair, projecting a powerful surge toward the 1.20 level in 2025. The bank's analysts cite a confluence of factors driving this outlook, primarily an anticipated weakening of the US dollar. Key drivers include a narrowing interest rate differential as the Federal Reserve signals a potential pause in its tightening cycle while the European Central Bank (ECB) maintains a more cautious, data-dependent stance on inflation. UBS also points to relative economic growth forecasts now favoring the Eurozone, which is showing resilient recovery signs, and excessively crowded speculative bets against the euro setting the stage for a sharp reversal.
Concurrently, Bank of America Securities has directed investor focus to the stability of the EUR/DKK peg, the fixed exchange rate system tying the Danish krone to the euro. Managed by Danmarks Nationalbank within a narrow band of 7.46038 kroner per euro (±2.25%), the peg is seen as a critical barometer of European financial stability for 2025. The firm's analysis highlights that the peg's resilience will be tested by the ECB's ongoing policy normalization, geopolitical tensions influencing safe-haven flows, and the need for precise calibration by the Danish central bank, which holds foreign reserves exceeding 600 billion Danish kroner.
The combined analyses underscore a pivotal moment in global currency markets. A sustained move in EUR/USD toward 1.20 would have broad implications, pressuring European exporters while benefiting US multinationals with European earnings. The focus on the EUR/DKK peg emphasizes the importance of fixed-rate systems within the European economic union and the potential for volatility if its defenses are perceived as vulnerable. Both forecasts acknowledge risks, including a resurgence of US inflation forcing renewed Fed hawkishness, geopolitical crises triggering dollar safe-haven flows, or political instability within the Eurozone undermining confidence.
