EUR/USD: ECB hawks lag Fed – ING
Despite the European Central Bank's (ECB) rhetoric hinting at a potential rate hike in December, as noted by ING, market sentiment currently favors the Federal Reserve's stance on tightening, leading to widening short-dated EUR/USD swap differentials. The EUR/USD pair struggles at the current spot of 1.1373, as investor confidence in Eurozone monetary policy lags behind the U.S. While some forecasts suggest a recovery, the prevailing sentiment attributed to the Fed's credibility indicates limited upside for the Euro in the short term.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.1400 (median across various firms), with CIBC positioned at the upper bound at 1.2200 and ABN Amro at a more conservative 1.1284. ING's perspective is reflective of the market's cautious outlook, placing credence on the Fed's actions compared to the ECB's projected path, suggesting a connection with the lower end of our consensus outlook.
How firms align
Names like RBC and Nomura are more optimistic with targets around 1.1700 for March 2026, aligning more with the ECB's hawkish signals than firms like HSBC and Abn Amro, which predict a slowdown around 1.1284. This divergence outlines a split in the medium-term outlook for EUR/USD, detailed further in our reports on the matter.
What the data shows
Recent forecast revisions from firms such as Mizuho and Scotiabank reflect a more cautious adjustment toward the Euro, signaling a shift as they now project targets of 1.1300 for March 2026. For more insight, please refer to our detailed analysis in /research/eurusd-ecb-rate-path-2026-11-13.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD struggles at 1.1373 due to diverging monetary policies.
- 02Market perception favors Fed's policy tightening over ECB's tentative moves.
- 03A potential breakout could trigger a retest of recent highs near 1.1400.
- 04Volatility expected ahead of the December ECB meeting.
Market implications
As the ECB approaches its December meeting, traders should keep an eye on the EUR/USD level around 1.1400 as a significant resistance point. Furthermore, any statements from ECB officials regarding interest rates could shift market sentiment, hence affecting our consensus target.
Risks to this view
A reversal of the current view could occur if the ECB unexpectedly signals a stronger commitment to forthcoming rate hikes, eroding the sentiment that the Fed's tightening is more credible. A surprise adjustment in ECB policy could see EUR/USD rise sharply past our current consensus.
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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