UBS believes in a bright future
UBS analysts are optimistic about the future, as the bank sees positive signals in the development of the pandemic in various countries, which supports their view of the potential to materialise a favorable scenario that implies a recovery in economic growth since June.
The bank believes that a workable system of testing, tracking and treatment will ensure the sustainability of quarantine mitigation. This will support growing appetite for risk and business will gradually adapt to new conditions. However, UBS notes that the aggressive growth of the Fed's balance sheet combined with fiscal stimulus in the U.S. is translated into a marked weakening of US dollar and a rally in the stock market. The bank expects that by the end of the year the S&P 500 index will return to 3,150 points, while the pound against the US dollar will rise to 1.33.
As for EUR/USD, bulls should count on more modest achievements at 1.13, taking into account the stimulating measures of the ECB and governments of the eurozone, as well as the risks of uneven recovery.
At the same time, UBS recognises that uncertainty remains high and does not rule out the possibility that the euro against the dollar will fall to parity in case the weakening of quarantine measures turns into a new wave of diseases, a protracted lockdown and increased risks for political stability in Europe and its unity.