LONDON, Feb 1 (Reuters) - UBS has revised up its expectations for how much the euro will strengthen against the dollar, saying on Thursday it now expects the single currency to trade at $1.30 by the end of 2018 as the market prices in stronger global growth.
Previously, the Swiss investment bank believed the single currency would close the year at $1.25. The euro has already crossed that threshold this year, though it was trading slightly under it on Thursday, at $1.2437.
The bank also revised up its forecasts for key bond yields. It believes Germany’s 10-year bond yield will be 1 percent by end of 2018 now, compared to its previous forecast of 0.90 percent and current trading levels 0.71 percent.
“What has surprised us is the speed of the market moves. This extraordinary speed is a result of strong growth momentum keeping financial conditions easy. On the back of this growth momentum, our Economics team have revised their growth views across regions,” UBS strategists said in a note.
UBS also now believes sterling will end 2018 at $1.37 , versus expectations of $1.32 previously, but down from its current levels of around $1.42.
The Swiss bank also believes the dollar will trade at 117 yen at the end of the year compared to its previous forecast of 122 yen.
UBS also revised its 10-year U.S. Treasury yield forecast upwards, and now expects it to be 2.90 percent by the end of 2018 as against its previous forecast of 2.70 percent. The U.S. 10-year Treasury yield was at 2.74 percent on Thursday. (Reporting by Abhinav Ramnarayan; Editing by Jemima Kelly)