UBS sees limited scope for the euro to weaken based on additional information on policy differentials.
"We also doubt whether funding status is a good characterization, given liquidity premiums are high. Greece presents a risk, but that is for a later date and may not be market-unfriendly. An acceleration in Euro area credit growth would bolster our view and suggests some potential upside to our EUR/USD call," UBS argues.
"We do not think, however, that the cross will move aggressively through the 1.17/1.18 level without triggering a reduction in ECB's inflation forecast and spark-off signals of additional QE. The ECB's current underlying FX assumptions are 1.10 in 2016 and 2017," UBS projects.