MUFG sees euro rallying to 1.20 against dollar by 2027 as ECB nears rate peak
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 1.1600 |
ING | Bullish | 1.1300 |
Société Générale | Bearish | 1.1000 |
From the original
Rate spread dynamics are reasserting themselves as the dominant EUR/USD driver now that Middle East risk premium has largely unwound from oil prices. A narrowing gap between US and European yield expectations, as Fed hike pricing fades faster than ECB pricing, points to scope for
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4 itemsMUFG Euro To Dollar Forecast: Fed Pick To Deliver 1.26 By Q3 2026 - Exchange Rates UK
The MUFG commentary anticipates a stronger euro against the dollar, forecasting a rise to 1.26 by Q3 2026, likely driven by anticipated Federal Reserve policy decisions. Per the full note from Exchange Rates UK, this shift is expected to align with macroeconomic conditions that favor the eurozone's recovery trajectory. The Fed's choice of a new chair may critically influence market sentiment, prompting this bullish outlook for EUR/USD. As such, this forecast emphasizes long-term positioning ahead of a potential policy pivot from the Fed, which could reshape the USD's appeal in the near term.
ECB preview: MUFG sees October hold, two hikes ahead. See EUR/USD year end at 1.12
The desk believes that the ECB will maintain its current interest rates through October, though a December hike is anticipated. Supporting this view is MUFG's analysis indicating that the French-German 10-year spread is projected to stabilize near 170 basis points under normal conditions, while the heightened spread above 200 basis points would signal more drastic fiscal risks reminiscent of the euro zone debt crisis. Per the full note [source], this dynamic suggests that EUR/USD is poised to stay within a 1.08 to 1.14 range, contingent on ECB communications and external factors such as energy prices.
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