EUR/USD: Growth convergence and Fed repricing – ABN AMRO
The recent analysis by ABN AMRO highlights a convergence in growth rates between the eurozone and the US, alongside a recalibration of Fed policy expectations. This phenomenon is critical as it narrows the interest rate differentials that previously favored the dollar. With EUR/USD currently trading at 1.1567, a bullish outlook for the euro is supported by expectations of a tighter monetary stance from the ECB relative to the Fed's potential easing. This offers a favorable backdrop for EUR/USD revaluation, as highlighted by the improved consensus among firms toward higher targets for the coming year.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across multiple firms), indicating a slight bullish sentiment. Firms such as Deutsche Bank (1.1800 for Mar26) align with this view, while others like UOB are more conservative with a lower target of 1.1536.
How firms align
Some of the more bullish positions come from Deutsche Bank, which projects EUR/USD at 1.1800 by March 2026. This aligns with the thesis presented by ABN AMRO, reinforcing the narrative of a strong euro outlook amidst favorable economic conditions. Conversely, UOB presents a cautious stance with a target of 1.1536.
What the data shows
Recent revisions have seen an upward adjustment in forecasts, with firms like Morgan Stanley projecting EUR/USD at 1.2000 by March 2026. This shift suggests growing confidence in the euro as it capitalizes on the emerging growth disparities between the regions, further supported by our research note /research/eurusd-ecb-rate-path, indicating that EUR/USD trades below the consensus of 1.20 for December 2026.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Current spot for EUR/USD is 1.1567 with a bullish consensus amid growth convergence.
- 02ABN AMRO's growth convergence argument supports a stronger EUR/USD outlook.
- 03Expect EUR/USD to target 1.1700 with potential to approach 1.1800 if trends hold.
- 04The ECB's stance will be pivotal in shaping future rate differentials.
Market implications
Traders should monitor the approaching ECB meetings and economic data releases as potential catalysts for EUR/USD fluctuations. Consensus indicates the pair may target the 1.1700 level, with room to breach higher as sentiment shifts positively toward the euro.
Risks to this view
The outlook for EUR/USD could be invalidated should the Fed exhibit more hawkish tendencies than anticipated, driving the dollar's strength unexpectedly. Additionally, negative economic signals from the eurozone could derail growth expectations embedded in current projections.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.55
Sources & References
How we cover this story
Other coverage on this pair
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