EUR/USD reacts to data: Fed rate hike expectations fall
The EUR/USD pair is responding to the latest economic data that has led to a decrease in Fed rate hike expectations. This shift has diminished the carry support for the USD, allowing EUR/USD to extend its recent gains. With the current spot at 1.1419, this movement reflects changing market dynamics, particularly as investors await upcoming inflation data which could recalibrate rate hike forecasts.
Where it sits in our coverage
Our consensus EUR/USD target is currently set at 1.1700 (median across firms for Mar26), with Goldman at the upper end at 1.1800 and MUFG at the lower end with 1.1800 for the same tenor. This positioning indicates a bullish consensus, further validated by the recent sentiment shifts.
How firms align
Firms like JPMorgan and Morgan Stanley are aligned with the bullish trend, both setting targets at 1.1800 for Mar26, indicating confidence in a stronger Euro against the USD. On the contrary, TMGM has a much lower target of 1.1447 for the same period, suggesting cautious outlook amid current conditions.
What the data shows
Recent forecast revisions show a shift towards higher expectations for the Euro, with Deutsche Bank upping their Mar26 target to 1.1800. This aligns with our ongoing research as noted in our recent publication /research/eurusd-ecb-rate-path-2026-08-14, which reported a median target of 1.16.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD gains traction amid falling Fed hike expectations; spot at 1.1419.
- 02Traders should note upcoming inflation data as a potential catalyst for rate predictions.
- 03Watch 1.1700 as the consensus target; breach could signify further upside.
- 04Pending inflation prints are critical to maintain bullish sentiment.
Market implications
Moving forward, market participants should focus on inflation data expected next week, which could shift rate hike dynamics again. The consensus level of 1.1700 remains pivotal, and a breakthrough here could pave the way for further gains in the EUR/USD pair.
Risks to this view
Risks to this bullish outlook include a stronger than expected inflation print, which could reignite Fed rate hike anticipation, subsequently strengthening the USD. Additionally, geopolitical events or economic data that undermine Eurozone stability could also force revision of bullish positions.
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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