UBS raises EUR/USD forecast on potential Fed rate cuts - Investing.com

What the desk is arguing

The desk posits that the recent upward revision in UBS's EUR/USD forecast indicates a growing consensus that Federal Reserve rate cuts are imminent, which would likely benefit the euro against the dollar. This view supports a medium-term bullish trend for EUR/USD, as lower U.S. interest rates would decrease the attractiveness of holding dollars, potentially driving more investors towards euro-denominated assets.

Furthermore, the current spot price of 1.1500 is well below the consensus target of 1.1800 for March 2026, suggesting the market may underestimate the euro's potential strength in a shifting macroeconomic environment. The counterfactual considered is that should the Fed maintain higher interest rates longer than expected, the euro could struggle to gain ground despite the revisions, but this scenario seems increasingly less likely given recent economic signals.

Where it sits in our coverage

Currently, our consensus target for EUR/USD is set at 1.1800 for March 2026, with a range spanning from 1.1700 to 1.2000 across various firms. This demonstrates a general agreement among analysts that EUR/USD has room to appreciate, albeit some divergence exists as seen in individual bank targets.

Specific firm targets show a reasonable spread, with JPMorgan and Goldman Sachs projecting EUR/USD at 1.1800 and 1.2100 respectively for March 2026, while Morgan Stanley has a slightly higher expectation at 1.2000. This divergence reflects how certain banks might view macroeconomic conditions differently, leading to varying forecasts.

• JPMorgan: 1.1800
• Goldman Sachs: 1.2100
• Morgan Stanley: 1.2000

How other firms see it

Various firms echo the optimistic sentiments presented by UBS, aligning closely with the upgraded forecast for EUR/USD. The stance across the board suggests a bullish outlook, reinforcing the view that the euro may strengthen if U.S. monetary policy shifts towards cuts.

• Goldman: Aligned with a Dec-26 target of 1.2500.
• ING: Aligned with a Mar-26 target of 1.1900.
• MUFG: Aligned with a Mar-26 target of 1.1800.