EUR/USD trims gains as fresh Trump tariff threats, Iran woes lift USD
EUR/USD has given back earlier gains after fresh tariff threats from President Trump and heightened geopolitical tensions in the Middle East, particularly around Iran, boosted demand for the US dollar. The pair, which had been attempting to recover from recent lows, reversed course as safe-haven flows favored the greenback. This move underscores the persistent sensitivity of EUR/USD to US policy rhetoric and geopolitical risk, which continue to overshadow euro-area fundamentals. The pullback suggests that near-term USD strength may persist absent a de-escalation in trade or geopolitical headlines, keeping EUR/USD under pressure toward our consensus targets.
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 at the upper bound (1.2000) and BofA and Barclays at the lower bound (1.1700). The headline's USD-bullish tilt aligns more closely with the lower third of the consensus range, where Deutsche Bank, Goldman, and JPMorgan also see limited upside near term.
How firms align
Firms with the most constructive EUR outlook, such as Morgan Stanley (Mar26: 1.2000) and Goldman (Dec26: 1.2500), may view the current pullback as temporary, while more bearish firms like BofA (Mar26: 1.1700) and Barclays (Mar26: 1.1700) see further downside consistent with the tariff-driven USD strength narrative.
What the data shows
Our recent research piece, 'EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below,' highlights the persistent divergence between spot and consensus expectations. The current spot around 1.1500 is well below the consensus, and the latest geopolitical headwinds only widen that gap, suggesting that a reassessment of consensus targets may be warranted if these factors persist.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD retreats from gains as Trump tariff threats and Iran tensions boost USD safe-haven demand.
- 02Spot at 1.1500 sits 3.87% below Mar26 consensus of 1.1800; downside risk remains.
- 03Watch for escalation in trade rhetoric or Middle East conflict for further USD strength.
- 04Morgan Stanley stands alone at the bullish 1.2000 Mar26 target; most firms cluster near 1.18.
Market implications
Next focus is on any follow-through from Trump's tariff threats and Iran-related headlines. A sustained break below 1.1440 (recent low) could accelerate losses toward 1.1300, while a de-escalation may see a bounce toward our Mar26 consensus of 1.1800. US jobs data next week will be key for rate expectations.
Risks to this view
A de-escalation in US-Iran tensions or a softening in tariff rhetoric could reverse USD gains quickly, pushing EUR/USD back toward the 1.18 consensus. Conversely, a sharp escalation that triggers a broader risk-off move may temporarily boost USD further, but elevated European uncertainty could cap EUR losses.
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.