Euro weakens below 1.1400 as Fed hike bets lift US Dollar
The euro has weakened below the 1.1400 mark, driven primarily by rising expectations for further Federal Reserve rate hikes, which have bolstered the US dollar. This shift in sentiment suggests that the USD may continue to gain ground if macroeconomic data supports an accelerated tightening path from the Fed. The current levels indicate a potential for continued downward momentum in EUR/USD, emphasizing the market's focus on interest rate differentials. As the euro hovers around these levels, further data releases and Fed communications will be crucial.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.1700 for March 2026, with a range from 1.1200 at the bearish stance held by Citi, to 1.2000 at the more optimistic view of UBS. The market is currently positioning itself closer to the lower end, as seen in recent revisions from firms like BYN and Deutsche Bank, suggesting that sentiment is becoming more cautious around the euro's strength.
How firms align
UBS and Deutsche Bank have set their EUR/USD targets at 1.2000 and 1.1800 respectively for March 2026, aligning more closely with the idea of a resilient euro in the medium term. However, with Citi's target as low as 1.1300, it highlights a division among firms about the euro's immediate outlook. More details can be found in our reports on these firms.
What the data shows
Notably, Danskebank revised its EUR forecast to 1.1866 for March 2026, indicating a more optimistic stance compared to recent bearish sentiment. Our recent research suggests this divergence could be indicative of broader market uncertainties and is elaborated further in /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD weakened below 1.1400, reflecting a bullish USD trend.
- 02A Fed tightening narrative accentuates the dollar's strength, challenging euro stability.
- 03Key levels to watch are 1.1300 (Citi) and 1.2000 (UBS) for medium-term positioning.
- 04Data releases this week could further influence the dollar's trajectory.
Market implications
Traders should watch for any shifts around the 1.1400 level, as firm positioning towards the USD could reinforce bearish sentiment for the euro. Upcoming US economic data and Fed commentary will be pivotal in determining the direction of this currency pair.
Risks to this view
If the Fed signals a pause in its rate hikes or if Eurozone economic data surprises positively, this could trigger a reversal in the current bearish trend for the euro. Key focus will be on inflation and employment figures in the coming weeks.
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: Stabilising above 1.1300 against US Dollar with risk driver – ING
Euro: Downtrend stretched near 1.1325 against US Dollar – UOB
EUR/USD downtrend extension suggests oversold conditions near 1.1325; watch for mean reversion or fresh bearish catalyst to determine next directional move.
EUR/USD Price Forecast: Rebounds above 1.1350, but outlook stays bearish below key resistance
EUR/USD bounce to 1.1350 lacks conviction; structural bearish bias persists until sustained break above key technical resistance.
Euro: Bearish bias with scope toward 1.12 against US Dollar – Scotiabank
Scotiabank's 1.12 EUR/USD target implies ~2% downside from current levels, signaling institutional conviction on euro weakness relative to dollar strength.
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