Euro: Fed story caps upside against US Dollar – ING
The euro remains under pressure against the US dollar, primarily due to the Fed's steadfast policy trajectory, which limits the euro's upside potential. ING's analysis highlights that enduring expectations of high US rates are suppressing any bullish momentum for the euro. This dynamic is crucial as the market navigates through interest rate discussions, impacting trading strategies for EUR/USD pairs.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.1700 (median across 11 firms), with firms like UBS at the upper end of 1.2000 and Citi near the lower bound at 1.1300. ING’s perspective aligns with this consensus, emphasizing the significant role of Fed policy on the EUR/USD dynamics.
How firms align
Aligned with ING's view, HSBC and Citi predict a target of 1.1700 for March 2026, consistent with the prevailing bearish sentiment surrounding the euro. On the contrary, firms like UBS maintain a more optimistic outlook at 1.2000, suggesting divergence in expectations. More details can be found in our internal reports on HSBC and Citi.
What the data shows
Recent forecast revisions indicate a slight bearish shift, particularly from Scotiabank and JPMorgan, both aligning their targets to 1.1800 for March 2026. Our published research '/research/eurusd-ecb-rate-path' also highlights the considerable gap as EUR/USD sits 4.82% below the December 2026 consensus of 1.20.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD trading at 1.1700 is under pressure amid high US rate expectations.
- 02Consider bearish strategies as Fed policy solidifies USD dominance.
- 03Watch for shifts in interest rate decisions to recalibrate euro targets.
Market implications
Looking ahead, the Fed's upcoming meeting will be critical. Maintain focus on the 1.1700 consensus level as traders assess potential market reactions to any hints of policy shifts. Positioning around March economic indicators will also provide insights into future directional moves.
Risks to this view
Any change in the Fed's interest rate outlook or unexpected inflation data in the US could disrupt the current market sentiment, potentially propelling the euro higher. A robust economic report from the Eurozone may also challenge the bearish stance on the euro.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
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