G10 currencies UBS View see UBS FX forecasts, below-right Recommendations ¢ The negative momentum on the EUR is likely to persist. The growth outlook has deteriorated in the last Tactical (6 months) couple of months to a point, which challenges the fiscal austerity efforts seriously. e Long USD, GBP and CAD ¢ The USD profits from European troubles, but the upside remains limited by expansive fed policy e Short EUR, and CHF ¢ The GBP is resuming its uptrend despite stimulus measures by the Bank of England. The main reason is Strategic (1 to 2 years) the need for diversification of the EUR and better current economic indicators. e We recommend investors diversify from ¢ The AUD seems to have found a bottom, and should recover on the back of better risk sentiment. We large USD and EUR exposures into minor believe the CAD remains one of the most attractive currencies. currencies. Structural financing issues ¢ The SNB has shown that it will defend the CHF-floor. EURCHF will remain in the 1.20-1.25 range. weigh on each of the major currencies. 4 Positive scenario FX targets: EURUSD >1.35/EURJPY 120 = °_ he best civersifiers Based i feng erm e Eurozone economies avoid a material contraction and financial market conditions recover. EURUSD CAD ond the Ek The AUD NOK and CHE should trade above 1.40 in this case. Yen weakness could develop, since hopes for global growth would Aveuldl ent lna added 5 hear arur make the carry-trade role of the yen more prominent. levels y y & Negative scenario FX targets: EURUSD <1.20 / EURJPY 100 e European growth outlook deteriorates further with continued recession in 2013. The euro could rapidly UBS CIO FX forecasts fall below 1.20. A European debt default cascade is a tail risk for the single currency. Risk aversion would 79 5D a _— _— lead to an extended USD and JPY rally. EURUSD 1.2485 1.22 1.28 1.32 1.31 . é : i : USDJPY 79.88 83 85 90 80 Note: Scenarios refer to global economic scenarios (see slide 7) soca Wease — 5 Gd aad od : . AUDUSD