Deutsche Bank sees dollar weakening 6% by end-2026 amid deficit concerns - Investing.com

What the desk is arguing

Deutsche Bank's forecast of a 6% depreciation for the dollar by 2026 underscores the growing apprehension regarding America’s financial health. They cite expanding budget deficits and the potential for increased government spending as primary drivers of this bearish outlook.

Additionally, the bank posits that the current trajectory of U.S. fiscal policy may fuel inflationary pressures, further undermining the dollar's value. The implicit counterargument here is that absent these fiscal concerns, the dollar might stabilize or appreciate against other currencies.

Where it sits in our coverage

Our internal consensus target for the EUR/USD pair stands at 1.075, with a narrow spread range of 1.04 to 1.12. While Deutsche Bank's bearish position aligns with our overarching concerns about fiscal sustainability, it diverges from the more stable outlook reflected in our consensus projection.

In reviewing specific firm targets, note the following:

• JPMorgan: Target of 1.10 for Dec-26
• Goldman Sachs: Target of 1.08 for Dec-26
• BNP Paribas: Target of 1.12 for Dec-26

How other firms see it

The broader industry perspective on the dollar shows some divergence from Deutsche Bank's outlook. Notably, Goldman Sachs and BNP Paribas maintain relatively bullish forecasts for the dollar against the euro.

However, some firms like BofA present a more bearish view, indicating a target that aligns closely with Deutsche Bank’s predictions of weakening. Their assessments emphasize the risks posed by lower growth and mounting fiscal challenges.

• Goldman Sachs: Aligned
• BNP Paribas: Aligned
• BofA: Contrary