EUR/USD: Recovery prospects face central bank pushback – DBS
DBS warns that EUR/USD recovery attempts face pushback from central bank rhetoric, as the ECB and Fed signal divergent policy paths. The pair's bounce from recent lows is fragile, with hawkish Fed comments and Eurozone growth concerns capping upside. This aligns with our view that consensus targets above 1.18 for 1Q26 may be optimistic given policy headwinds. DBS' stance reinforces the need to watch central bank guidance for near-term direction.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1800 for March 2026 (median across 8 firms), with Morgan Stanley the most bullish at 1.2000 and BofA/Barclays at the lower bound of 1.1700. DBS' cautious view aligns more closely with the lower third of our range, though most firms see some recovery over the medium term. The current spot at 1.1500 stands 2.6% below our March consensus, leaving room for upside but with risks tilted by central bank messaging.
How firms align
DBS' bearish tilt on EUR/USD echoes the stance of BofA and Barclays, which hold the lowest 1Q26 targets among our tracked firms at 1.1700. Conversely, Morgan Stanley and ING (1.2000 and 1.1900 respectively) see more recovery potential. The divergence across firms highlights the uncertainty around ECB vs Fed policy trajectories, with DBS' pushback narrative favoring the cautious camp.
What the data shows
Our recent research, "EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below" (/research/eurusd-consensus-divergence-may-2026), already flagged the gap between consensus optimism and spot levels. DBS' warning reinforces that central bank pushback is a key risk to convergence toward those targets, particularly if the Fed stays hawkish.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01DBS warns ECB and Fed pushback could cap EUR/USD recovery, aligning with our consensus at 1.18 facing headwinds.
- 02Spot at 1.1500 is 2.6% below 1Q26 consensus; central bank rhetoric is the critical swing factor.
- 03Watch for hawkish Fed surprises or dovish ECB shifts as key catalysts for positioning.
- 04Morgan Stanley and ING are most bullish; BofA/Barclays align with DBS' cautious view.
Market implications
Next focus: ECB policy meeting and Fed minutes. A hawkish hold from the Fed could push EUR/USD back toward 1.14, while any dovish ECB pivot would weaken the euro. Our consensus range of 1.17-1.20 for 1Q26 remains vulnerable if central bank messaging hardens.
Risks to this view
A more aggressive Fed rate cut trajectory or a hawkish ECB shift would invalidate DBS' view, driving EUR/USD above 1.20. Conversely, a sharper Eurozone recession or geopolitical shocks accelerating safe-haven USD demand could break below 1.14.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD strengthens as mixed US labor data and hopes for a US-Iran deal pressure the Greenback.
Soft US labor print reduces Fed rate-hike conviction; geopolitical risk-off from Iran talks risk-off flows weaken USD safe-haven demand.
EUR/USD: Recovery eyes full retracement – Scotiabank
EUR/USD recovery momentum suggests technicians are positioning for mean reversion toward recent highs, indicating potential USD weakness into resistance.
EUR/USD: Binary path around Gulf deal – ING
EUR/USD: Oil shock, real rates and conflict risks – Commerzbank
Oil shock transmission via real rates and geopolitical premium widens USD carry advantage; EUR structural support erodes as terminal rates diverge.
Cross-firm research
EUR/USD Trades 3.87% Below Consensus: What the Gap Reveals
EUR/USD spot at 1.1727 sits 3.87% below the eight-firm median Dec-26 target of 1.22, exposing a structural divergence that demands explanation.
EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below
Eight sell-side firms hold a median Dec-26 target of 1.22 for EUR/USD while spot trades at 1.1727, a gap that demands explanation.