EUR/USD dives as Fed hike bets rise ahead of Trump-Xi meeting
The EUR/USD has taken a notable dive as market expectations for a Federal Reserve rate hike intensify ahead of the upcoming meeting between Trump and Xi. This shift highlights the growing divergences between US monetary policy and Eurozone economic indicators, with heightened Fed tightening risks propelling the dollar stronger against the euro. The looming geopolitical discussions could add further volatility to this pairing, underscoring the importance of monitoring central bank communications and economic data from both regions.
Where it sits in our coverage
Our consensus EUR/USD target currently rests at 1.1684 (median across 12 firms), with Morgan Stanley presenting the most bullish view at 1.2000 for March 2026, while Danske Bank is at the lower end of our range with a target of 1.1100. This diverging outlook from the firms reflects varying assessments of Eurozone fundamentals and Fed policy direction amidst current geopolitical tensions.
How firms align
Several firms are leaning towards a stronger dollar narrative in light of recent developments. Notably, RBC has projected a March target of 1.1600, aligning closely with the prevailing market sentiment, as detailed in our internal reports. Conversely, Danske Bank's bearish December target of 1.1100 suggests a significant divergence from the majority, indicating differing expectations for EUR performance.
What the data shows
Recent forecasts, including BNP Paribas' upward revision to 1.2100 for December 2026, reflect a nuanced outlook for EUR/USD in the context of changing market conditions. Additional insights can be found 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 declines to 1.1446 as Fed hike expectations rise.
- 02Increased focus on geopolitical tensions between Trump and Xi.
- 03Monitoring the Fed's next moves is crucial for EUR/USD traders.
- 04Key resistance observed around 1.1700.
Market implications
Key levels to watch include 1.1400 as a potential support, and the consensus target of 1.1684 should guide expectations in the coming weeks. Upcoming Fed announcements and economic data releases will be critical for price action.
Risks to this view
A reversal in this outlook could occur if geopolitical tensions ease significantly, or if unexpected dovish signals are sent by the Fed, possibly leading to a stronger EUR. Any positive indicators from the Eurozone could also challenge the current bearish stance.
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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