EUR/USD estimated downside to 1.1500 end of 2012

source:UBS

January witnessed the bloc currency surge from sub 1.2650 levels to the 1.3230 region. Better-than-expected key economic indicators in the euro zone, successful bond and T-bill auctions in Germany and peripheral debt markets bolstered the impressive upside along with a boost in liquidity channeled by the ECB’s LTRO.
This (ephemeral?) improvement in the euro zone fundamentals appears to be the main driver for the ECB to leave the benchmark interest rate unchanged in this week’s meeting.

But according to M.Mohi-uddin, Managing Director of Foreign Exchange Strategy at UBS, he expects the European monetary authority to cut the overnight interest rate in the next meetings adducing that the austerity measures embarked by euro zone members would keep the region in recession in 2012, an increment in central banks’ balance sheet as a result of the LTROs and the yet unsolved negotiations in the Greek front.

“This keeps us bullish on the dollar against Europe’s currencies with EUD/USD likely to end the year significantly lower at 1.1500….”, he affirmed.

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