Euro: Soft tone against US Dollar with stable ECB expectations – Scotiabank
The euro continues to trade with a bearish bias against the US dollar, driven by stable expectations surrounding the European Central Bank (ECB). Scotiabank's analysis underscores that the ECB's current hold pattern diminishes potential upside for EUR/USD in the near term, which favors continued USD strength due to rate differentials. This environment poses challenges for the euro, especially as market participants might reassess their short-term positioning in light of the prevailing sentiment and economic data releases.
Where it sits in our coverage
Our current consensus EUR/USD target stands at 1.1734 for March 2026, with a range from Citi's bearish forecast of 1.1300 to Commerzbank's bullish target of 1.1900. Scotiabank's latest analysis reflects a more cautious outlook, aligning near the upper bound of our range, suggesting a sentiment shift that could influence trading strategies ahead.
How firms align
Scotiabank is more aligned with the upper consensus number, reflecting a moderate outlook on the euro against the dollar. Firms like Goldman and HSBC also maintain outlooks close to Scotiabank, projecting 1.1800 and 1.1700 respectively, indicating a possible convergence among views. Conversely, Citi's more bearish stance of 1.1300 for March suggests a divergence worth monitoring closely.
What the data shows
Recent revisions from Scotiabank have shown adjustments to more cautious targets, with a slight decline in the 2026 expectations indicating a market reluctant to bet against the dollar strength. Our internal research on EUR/USD suggests potential downside risks could come into play, as thematic factors affecting the euro are discussed in our report /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD trades soft at 1.1434 amid stable ECB outlook.
- 02Traders should note the growing USD strength linked to rate differentials.
- 03Citi's Mar26 target at 1.1300 flags bearish sentiment pressures.
- 04Watch for ECB communications that could shift current expectations.
Market implications
Looking ahead, key levels to monitor will include the recent support at 1.1400, while the consensus target at 1.1734 provides a reference for potential upside. Calendar events related to ECB meetings may further influence sentiment and positioning in the euro space.
Risks to this view
A shift in ECB policy or unexpected shifts in economic indicators could invalidate the current bearish outlook for the euro. Signals indicating a more hawkish stance from the ECB could trigger a rapid reassessment and push EUR/USD levels higher.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.35
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
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