Euro softens toward 13‑month low near 1.1350 as rising US PCE inflation lifts US Dollar
The euro has weakened significantly, approaching a 13-month low at around 1.1350, driven by rising U.S. PCE inflation that intensifies expectations for more aggressive Federal Reserve rate hikes. This shift has bolstered the U.S. dollar, creating downward pressure on EUR/USD despite the current spot being at 1.1500. The market's response indicates a growing acceptance of a widening policy divergence between the Fed and the ECB, which holds implications for future currency valuation dynamics.
Where it sits in our coverage
Our consensus EUR/USD target stands at 1.1700, reflecting a median across various firms, with Deutsche Bank at the higher end of the spectrum (1.2500) and Citi at the lower end (1.1300). This positioning underscores a varied outlook among analysts regarding the euro's resilience against the dollar's strength.
How firms align
Firms such as Deutsche Bank and HSBC are more optimistic about the EUR/USD pair, with targets of 1.1800 and 1.1700, respectively, indicating a belief in a potential recovery. In contrast, Citi’s forecast suggests lower expectations, demonstrating caution amid rising U.S. inflation. Notably, recent revisions from J.P. Morgan and Goldman Sachs align with the view that the euro could see limited upside in the near term due to U.S. monetary tightening pressures.
What the data shows
Recent revisions from firms like Scotiabank and J.P. Morgan, setting targets at 1.1734 and 1.1800 respectively, indicate a consensus view that acknowledges current pressures while supporting a preference for the euro in the medium-term outlook. For further insights, refer to our research on the ECB's rate path: /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD slips toward 13-month low at 1.1350, driven by U.S. inflation data.
- 02Traders should monitor shifts in Fed rate expectations as critical catalysts.
- 03Bearish sentiment prevails; focus on 1.1350 as a key support level.
- 04Future price action will likely hinge on ECB policy signals.
Market implications
Investors should watch for the euro's reaction around the 1.1350 level as a potential breakdown could lead it lower. With our consensus target at 1.1700, any developments from the upcoming Fed meeting or ECB announcements could shift market sentiment significantly in the near term.
Risks to this view
A significant turnaround in this view could occur if upcoming data points, such as a surprise drop in U.S. inflation or a more dovish stance from the Fed, emerge. Additionally, a shift in ECB communication indicating heightened policy action could reverse euro depreciation trends.
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 gains as US Dollar retreats despite firm PCE inflation, German sentiment improves slightly
USD weakness despite sticky PCE suggests market has priced in terminal rate scenario; German sentiment improvement supports EUR upside on better growth narrative.
Euro stabilizes near 13-month lows against the US Dollar after in-line US inflation data
EUR/USD Price Forecasts: Nearing yearly lows at 1.1330 ahead of US Inflation figures
EUR/USD approaching 2024 lows ahead of US CPI print suggests market pricing USD strength on inflation expectations; watch for breakdown below 1.1330 if data exceeds consensus.
Euro: Stabilising above 1.1300 against US Dollar with risk driver – ING
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