UBS Cuts Forecasts for AUD/USD and EUR/CHF Amid Trade Tensions and Market Volatility
Swiss banking giant UBS has revised its outlook for two major currency pairs AUD/USD and EUR/CHF as global economic instability, trade war pressures, and rising market volatility continue to rattle investor sentiment.
Australian Dollar Deemed ‘Main Casualty’ of U.S.-China Trade War
UBS analysts have downgraded their forecast for the Australian dollar against the U.S. dollar (AUD/USD), citing the currency’s heightened sensitivity to global risk-off sentiment and ongoing U.S.-China trade tensions. The firm also closed its long-standing AUD/SEK recommendation, initially opened in March, due to deteriorating fundamentals.
According to UBS, the Australian dollar has become the biggest victim of recent spikes in equity market volatility, plunging to levels not seen since the peak of the COVID-19 market crash in March 2020. Despite Australia’s relatively limited direct exposure to U.S. protectionist measures, the broader geopolitical environment particularly China’s retaliatory tariffs has weighed heavily on the AUD.
The bank acknowledges the possibility of a short-term rebound in the AUD; however, it warns that escalating friction between the world’s two largest economies poses serious downside risks. UBS now holds a more conservative view on the medium-term trajectory of the Australian dollar, urging caution as markets remain vulnerable to trade-driven shocks.
EUR/CHF Forecast Lowered as Swiss Franc Strengthens on Market Volatility
In a separate note, UBS revised its projections for the euro against the Swiss franc (EUR/CHF), citing persistent market uncertainty and strong investor demand for safe-haven assets. The bank cut its end-2025 target for EUR/CHF from 0.97 to 0.94, and its end-2026 forecast from 1.00 to 0.96.
UBS attributed the adjustment to heightened global risk aversion, rising volatility (as measured by the VIX), and a backdrop of U.S. policy unpredictability. These factors are expected to keep the Swiss franc under upward pressure for longer than previously anticipated.
“Given the current environment of high VIX levels and policy uncertainty, CHF appreciation may persist beyond our earlier expectations,” UBS strategists stated.
While the Swiss National Bank (SNB) could potentially act to dampen excessive currency strength, UBS advised investors not to preempt such moves until the EUR/CHF dips below the lower boundary of its Q2 trading range, set between 0.92 and 0.97.
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