EUR/USD falls to near 1.1700 as US to raise tariffs on EU vehicles
EUR/USD slumped toward 1.1700 after the US announced plans to raise tariffs on EU vehicles, escalating trade tensions. The move underscores renewed USD strength on safe-haven flows and a direct blow to the euro zone's export sector. With spot now at 1.1500, the pair is trading well below our consensus target range, suggesting the market is pricing in a more protracted trade conflict. The key question is whether the ECB will signal dovish accommodation or wait for clearer growth data. This tariff risk adds downside pressure to our already below-consensus EUR view.
Where it sits in our coverage
Our consensus EUR/USD target for Mar26 sits at 1.1800 (median across 8 firms), with Morgan Stanley at the upper bound (1.2000) and BofA and Barclays at the lower (1.1700 each). Current spot at 1.1500 is 4.2% below the consensus, pushing the pair into undervalued territory relative to the median forecast. The tariff announcement aligns more closely with the bears — BofA and Barclays share that downbeat framing, while the euro bulls at Morgan Stanley and Goldman face headwinds.
How firms align
BofA and Barclays, both with Mar26 targets of 1.1700, are best positioned for the current sell-off. Their cautious outlook matches the tariff shock and potential further escalation. On the other hand, Morgan Stanley's 1.2000 target and Goldman's 1.1800 (though not in the top quartile) appear optimistic given the new trade risks. JPMorgan and Deutsche Bank, both at 1.1800, sit right at the median but may need to revise lower.
What the data shows
Our recent research, 'EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below' (slug: /research/eurusd-consensus-divergence-may-2026), highlighted the wide gap between consensus and spot. The tariff announcement widens that divergence further. The median Dec26 target of 1.2200 now looks optimistic, especially with Morgan Stanley forecasting a decline to 1.1600 by year-end.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US tariff threat on EU vehicles drives EUR/USD toward 1.1700; spot at 1.1500 faces further downside risk.
- 02Consensus Mar26 median is 1.1800, but tariff headwinds favor bearish firms like BofA (1.1700) and Barclays (1.1700).
- 03ECB response is key; dovish signal or rate cut could accelerate EUR selling toward 1.1400.
- 04Watch for US July auto import data and EU retaliatory tariff announcements as next catalysts.
Market implications
Watch for EUR/USD to test the 1.1450 support level, a key pivot from early 2025. The next catalyst is the ECB meeting on July 25, where any dovish lean would validate the bearish view. Our consensus median of 1.1800 for Mar26 now appears at risk; we see a bias toward the lower end of the range (1.1700-1.1900).
Risks to this view
A de-escalation in trade talks, such as the US granting a tariff exemption or the EU offering concessions, could reverse EUR/USD strength. Additionally, a hawkish ECB maintaining rate hikes would support the euro and invalidate the bearish bias. Stronger US inflation data could also fuel USD buying, but that would reinforce rather than invalidate the current move.
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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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.