EURUSD to see another drop below parity, GBPUSD to fall toward 1.10 – UBS

The US Dollar has fallen since last week’s milder-than-expected inflation data. Nonetheless, economists at UBS expect the greenback to stay on a solid foot for the time being, dragging EURUSD and GBPUSD down to 1.00 and 1.10, respectively.

Near-term risks remain tilted toward a stronger US Dollar

“We think the near-term risks remain tilted toward a stronger US Dollar. We continue to rate the greenback as most preferred in our foreign exchange strategy, alongside the Swiss Franc, another safe-haven currency.”

“We think there is a high chance that risk aversion will return and recommend investors prepare for another drop below parity for the Euro and Cable to fall toward 1.10.”

“We also recommend selling upside risk in EURUSD and the downside risk in the US Dollar versus the Yen as a short-term yield-enhancement strategy, given the pick-up in foreign exchange volatility.”