UBS has re-entered a long EUR/USD position at 1.1475, aiming for 1.17 with a stop at 1.13, citing central bank policy changes as the main reason for its renewed trade.
UBS has reopened its long position on the euro against the US dollar, entering the trade near 1.1475. The bank is targeting a move to 1.17, with a stop-loss set at 1.13. UBS points to recent central bank policy changes as the main reason for this renewed strategy.
Earlier this year, UBS took a similar position, also aiming for 1.17 with a stop at 1.13. When the pair reached the target, the bank raised its goal to 1.20 and moved the stop to 1.15, choosing to stay in the trade. That position closed this week when the stop-loss was triggered. UBS has not specified the exact date, but now sees the current price as a good entry point, returning to its original July setup.
Central bank policy shifts shape the trade
UBS's decision is based on recent moves by the European Central Bank (ECB) and the US Federal Reserve. In September 2026, the ECB raised its deposit rate by 25 basis points to 2.50% and the main refinancing rate to 2.65%, effective September 16. This was the ECB's second rate hike of the year, following a move in June, and signaled that inflation in the euro area remains a concern. Meanwhile, the Federal Reserve increased its target range by 25 basis points to 3.75%-4.00%, widening the interest rate gap in favor of the dollar, according to Reuters.
The EUR/USD pair has seen sharp swings in recent months, reflecting these policy differences and changing expectations. On the day of the Fed's September decision, the euro traded around 1.1502, down 0.3%, as traders reacted to the prospect of more US rate hikes. UBS's new trade comes as other major banks, including Morgan Stanley, expect further tightening from both the Fed and the ECB by year-end, with forecasts for another Fed hike in December and a possible ECB move to 2.75%.
Clear risk management and targets
UBS's approach is notable for its defined risk and reward. The stop-loss at 1.13 limits potential losses, while the 1.17 target sets a clear profit goal. This structure is meant to help manage the volatility that often follows central bank decisions. The ECB's latest statement was described as "mixed but hawkish overall," with inflation forecasts staying above target, which supports a cautious but active stance from the central bank.
Recent moves in the Swiss franc and euro have also shown how central bank policy can drive currency trends. As reported earlier, differences in yields and policy have played a key role in recent EUR/CHF moves, highlighting the broader impact of central banks on major currency pairs.
At the time of UBS's latest call, EUR/USD was trading near 1.1475. The previous trade closed when the stop at 1.15 was hit, after first reaching the 1.17 target and then raising it to 1.20. The new position returns to the original entry, target, and stop-loss levels.
How central banks influence currency pairs
Central banks affect currency values through policy decisions like interest rate changes, asset purchases, and forward guidance. When a central bank signals a change-tightening or easing-it can shift how attractive its currency is. For the euro and dollar, differences between ECB and Fed policy often drive big moves in EUR/USD. Traders and institutions watch these signals closely, as even small changes in tone or expectations can move the market. Still, central bank policy is not the only factor; geopolitical events, economic data, and market sentiment also matter. For more on recent ECB actions, see the official ECB press release.
