FX Daily: Lagarde lifts some support from the euro
At a Glance
Per the full note , the desk sees renewed risks for the euro following dovish comments from ECB President Christine Lagarde. Specifically, Lagarde's remarks are creating vulnerability for the EUR/USD pair, which had previously shown signs of potential recovery. Current conditions in the Gulf, coupled with broader economic concerns, are placing downward pressure on the euro, making its strength less likely amidst rising U.S. rates and geopolitical tensions. With our internal EUR/USD consensus at 1.1700 for March 2026, the desk suggests that maintaining a bearish stance toward the euro could be prudent.
Key Takeaways
- 01Lagarde’s dovish statements have weighed on the euro, suggesting further downside risk.
- 02The U.S. dollar remains strong, bolstered by rising interest rates and geopolitical tensions.
- 03Our internal consensus for EUR/USD aligns with concerns raised in the broader market about euro strength.
- 04Current geopolitical conditions serve as a significant factor influencing euro volatility.
Full Analysis
What the desk is arguing
The desk contends that recent dovish signals from ECB President Christine Lagarde have undermined the euro's strength and tilted EUR/USD risks downward. This realignment of sentiment comes as market conditions, influenced by geopolitical tensions and central bank actions, continue to shape the currency landscape.
The possibility of a continued upside for EUR/USD has been curtailed as pressure from Gulf developments and Lagarde’s dovish tone raises doubts about the eurozone's economic trajectory. Our view is underscored by the persistent strength of the U.S. dollar in the current environment, where rising rates are putting pressure on international assets, including the euro.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.1700, with a range anticipated between 1.1200 and 1.2000 by March 2026. Specific firm targets include: - dhfc: 1.1400 (Mar26) - barclays: 1.1700 (Mar26) - nomura: 1.1700 (Mar26)
The desk's outlook aligns closely with this range, particularly leaning towards the lower bound suggested by llyods at 1.1331 for March 2026, indicating a cautious sentiment around the euro's potential even amidst some optimistic forecasts from other firms.
How other firms see it
Several firms such as hsbc and barclays align with our bearish perspective on the euro, echoing similar forecasts for declines in EUR/USD. However, firms like danskebank appear more optimistic, forecasting stronger performance for the euro.
This euro outlook dovetails with dynamics in other pairs like USD/JPY, influenced heavily by corresponding central bank actions, particularly the Federal Reserve's rate adjustments relative to the Bank of Japan's loose monetary policies.
Market Implications
Traders should monitor the EUR/USD level closely around 1.1700, as any breaking change in U.S. consumer sentiment or geopolitical developments could exacerbate volatility. Significant attention should also be paid to the upcoming U.S. JOLTS report which may influence dollar movements further.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 0.7000 |
Danske Bank | Bearish | 0.6800 |
UBS | Bullish | 0.7300 |
From the original
Articles FX Daily: Lagarde lifts some support from the euro Published 07:50 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Yesterday, we felt EUR/USD had a good chance of some recovery, but Gulf developments and dovish comments from Christine Laga
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