Euro: Policy divergence supports against US Dollar – Rabobank
Rabobank emphasizes that the ongoing policy divergence between the European Central Bank (ECB) and the Federal Reserve underpins the euro's resilience against the dollar. This divergence has the potential to anchor EUR/USD levels amid turbulent market conditions, particularly as investors navigate the implications of a resilient US economy juxtaposed with a more dovish ECB stance. With the euro currently at 1.1567, the structural support could suggest limited dollar gains in the near term, reinforcing a bullish sentiment towards EUR.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across 11 firms), with UBS positioned at the highest end of the spectrum at 1.2000, while Danske Bank is notably more cautious at 1.1200. This spread among firms underscores the uncertainty regarding the euro's trajectory amidst contrasting monetary policies.
How firms align
Firms such as Deutsche Bank and MUFG have targets of 1.1800 for March 26, indicating a bullish outlook that aligns with Rabobank's analysis. However, banks like Citi and Danske Bank forecast lower targets at 1.1300 and 1.1866 respectively, reflecting varying degrees of optimism given the macroeconomic context. [View Citi’s forecast here](/reports/citi) for a deeper dive into their stance.
What the data shows
Forecast revisions from UBS and Danske Bank have trended upwards recently, reflecting increasing confidence in euro strength, with UBS raising their March target to 1.2000. Additionally, our research highlights that EUR/USD trades 3.3% below the December 2026 consensus of 1.20, suggesting potential for recovery. For more insights, refer to our analysis in /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD currently trades at 1.1567; ECM-FED policy divergence supports a bullish EUR outlook.
- 02Watch for key resistance near 1.1700 in the near term.
- 03Recent positive revisions from major firms bolster confidence in a euro resurgence.
- 04Market may focus on upcoming ECB and Fed meetings for additional directional cues.
Market implications
Monitor EUR/USD around the 1.1700 mark; a break above this level could accelerate bullish sentiment further. Additionally, the market should brace for the upcoming ECB meeting, where policy guidance may provide further clarity on the euro's trajectory, closely aligned with our consensus target of 1.1700.
Risks to this view
Should economic data from the Eurozone reveal unexpected weakness or if the Fed adopts a more hawkish approach than anticipated, there could be a swift correction in EUR/USD. Specifically, a US employment report exceeding expectations could invigorate dollar strength, challenging euro support.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.55
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
Euro: Test of 1.140 seen before recovery against US Dollar – ING
ING positioning for EUR/USD test of 1.140 signals near-term dollar strength before mean reversion; watch for support breaks that could accelerate dips.
Euro weakens against US Dollar as hawkish Fed bets hog limelight
Market repricing Fed hold probability higher amid hawkish rhetoric, widening rate differential favoring USD/EUR longs.
Euro: Pressured as US Dollar stays firm – Danske Bank
USD strength persisting creates headwind for EUR positioning; monitor if dollar momentum extends into risk assets or remains defensive-driven.
Euro: Consolidation before potential slide against US Dollar – UOB
UOB technical outlook suggests EUR/USD weakness ahead, implying near-term USD strength following consolidation phase.
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