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27 July 2026, 17:41 UTC Chief Investment Office GWM Investment Research

EMEA macro outlook and investment ideas A summary of our EMEA macro outlook and investment ideas across equities, foreign exchange, fixed income, and CEEMEA

Themis Themistocleous, Head EMEA Chief Investment Office

This report has been prepared by UBS AG London Branch, UBS Switzerland AG. Please see important disclaimers and disclosures at the end of the document.

EMEA: Outlook and key investment views What’s changed? • Renewed energy price pressures have intensified upside risks to inflation, but central banks see limited evidence of second-round effects, yet. • In our view, the ECB is likely to remain biased toward hiking once more at the September meeting (taking the deposit rate to 2.5% before pausing). As inflation pressures fade, we look for rates to be cut in 2027. We expect the BoE to hold policy rates at 3.75% through year-end 2026. • Eurozone growth is resilient, supported by domestic demand, low unemployment, and German fiscal easing, while tighter financing conditions should have limited impact on activity and an eventual diplomatic solution in the Middle East should support a rebound in regional confidence. • We forecast Eurozone GDP growth of +0.8% y/y and +1.0% for the UK in 2026. Why it matters • Central banks are unlikely to enter a prolonged hiking cycle, in our view, with investors standing to benefit from a repricing of rate expectations. • We see appealing carry and a decline in yields as key drivers of total return for bonds overall going forward. • We believe limited monetary policy divergence lends itself to subdued FX volatility, supportive of selective exposure to pro-growth, carry currencies. • We expect Eurozone profits to exit years of stagnation with the region’s equities positioned to benefit from an improving industrial cycle, stronger investment spending, a more supportive structural backdrop, and reasonable valuations. How to position Equities • We upgraded European equities to Attractive with our preferences in the region favoring European banks, industrials, consumer discretionary, health care, German equities, as well as our "Luxury & Lifestyles," "European leaders," and "Swiss high-quality dividends" themes. Foreign exchange • We remain Neutral on the EUR, with performance likely underpinned by the evolution of European growth as rate hikes are already priced, in our view. • Correlations with oil have increased strongly recently, making a long NOK position a good oil-price hedge. • Political uncertainty has weighed on the GBP in recent quarters, with extreme short positioning and a growth recovery driving rebound potential. • Tactical opportunities: Consider a diversified basket of high-yielding EM currencies, including the ZAR. Fixed income • Stay selective and consider optimal maturities of 2-6 years in USD and GBP, 2-10 years in EUR and CHF, and A/BBB-rated corporate bonds. • In GCC credit, we favor instruments of higher-rated issuers including sovereigns, resilient to trade route disruptions.