Euro weakens as strong ADP data and Trump's Iran comments boost US Dollar
The Euro is under pressure following robust ADP employment figures and heightened geopolitical concerns stemming from former President Trump's comments about Iran. This dual influence is propelling the US Dollar higher, strengthening the bullish sentiment around it. The situation underscores a divergence in economic performance and risk perception, which may continue affecting currency valuations. As the market reassesses the Euro's strength in light of these developments, the outlook reflects contrasting expectations between the US and Eurozone economies.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across firms), with Morgan Stanley predicting the highest target at 1.2000 while Citi forecasts a significantly lower target of 1.1300. This context highlights a prevailing optimism toward the Euro amidst current weakness.
How firms align
JPMorgan and Goldman Sachs both target EUR/USD at 1.1800 for March 2026, indicating a relatively bullish stance that contrasts with the recent bearish shift caused by the US data release and geopolitical risks. Other firms, like Citi, hold a more bearish perspective, predicting a drop to 1.1300 by March 2026, as detailed in /research/citi-eur-outlook.
What the data shows
Recent forecast revisions from ING and Morgan Stanley indicate that while the sentiment is shifting due to current events, long-term expectations largely remain optimistic as they both revised their March 2026 targets to 1.1900. This aligns with our prior insight, as seen in /research/eurusd-consensus-divergence-may-2026-20260519-1105.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Dollar strength is amplified by strong US labor data; Euro feels the pinch.
- 02Watch for EUR/USD reaction at current support around 1.1500.
- 03USD bullishness could solidify if geopolitical tensions rise further.
- 04Market expectations diverge, with consensus showing scattered EUR targets.
Market implications
The upcoming US data schedule, including Non-Farm Payrolls, will be crucial in shaping market sentiments and expectations. A sustained Dollar rally could see EUR/USD testing critical support levels around 1.1500. Our consensus number of 1.1700 reflects broader expectations, which could adjust based on upcoming economic indicators.
Risks to this view
A reversal in this view may occur if Eurozone data outperforms expectations, significantly boosting the Euro's appeal. Additionally, any diplomatic resolution regarding Iran could alleviate geopolitical tensions, potentially reversing the current USD bullish sentiment.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
Euro: Limited downside against US Dollar with ECB hike message – MUFG
ECB's continued hike messaging supports EUR/USD floor around current levels; limited downside signals reduced momentum for USD longs.
Euro: Gains capped against US Dollar by Fed story – ING
Fed rate expectations remain supportive of USD strength, structurally limiting EUR/USD upside despite recent euro resilience.
EUR/USD Price Forecast: 20-day EMA remains key barrier as Iran uncertainty persists
Euro slips as Hormuz firefight revives US Dollar demand
Geopolitical risk in Persian Gulf elevates safe-haven demand, likely to support USD/JPY parity and cap EUR/USD downside until tensions clarify.
Bank desks on this topic
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
EUR/USD was hit in March on expectations that the stagflationary shock from Iran would resonate more in Europe than the US. The inflationary effects have been plain for all to see, but this week's release of European PMIs warns that the stagnationary effect is just starting to la
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? - eFXdata
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? eFXdata
Cross-firm research
EUR/USD Trades 3.16% Below Dec-26 Consensus as 18 Firms Hold 1.20 Median
With spot at 1.1621 and the 18-firm median Dec-26 target at 1.20, EUR/USD sits 3.16% below consensus—a gap that demands explanation.
EUR/USD Trades 3.2% Below Dec-26 Consensus as Targets Cluster Near 1.20
Spot at 1.1612 sits 3.2% below the 18-firm median Dec-26 target of 1.20, exposing a consensus that remains structurally bullish EUR despite the pair's failure to close the gap.
EUR/USD Trades 4% Below Dec-26 Consensus: What the Gap Reveals
EUR/USD spot at 1.1711 sits 4.01% below the eight-firm median Dec-26 target of 1.22, exposing a structural tension between macro conviction and current tape.