Euro: Bearish bias with scope toward 1.12 against US Dollar – Scotiabank
Scotiabank's bearish outlook for the euro against the US dollar, targeting 1.12, reinforces the prevailing sentiment in an increasingly strong dollar environment. With the EUR/USD currently trading around 1.1500, this suggests a potential downside of approximately 2%. Institutional players appear to be positioning for further euro weakness, particularly as stronger economic data from the US takes center stage. Market participants should consider the implications of potential ECB policy shifts and ongoing rate adjustments by the Fed.
Where it sits in our coverage
Our consensus EUR/USD target remains at 1.1700 (median across participating firms), with diverse expectations ranging from 1.1100 by Citi to 1.2000 from UBS. Scotiabank's bearish stance aligns closely with more cautious targets from firms like Citi and Danske Bank.
How firms align
Firms such as Citi (targeting 1.1300) and Danske Bank (1.1866) resonate with Scotiabank's outlook, reflecting a more pessimistic view on the euro. In contrast, UBS and Deutsche Bank maintain higher targets of 1.2000 and 1.2500 respectively, indicating a divergence in market sentiment. This can be explored further in our internal reports, particularly /reports/citi and /reports/danskebank.
What the data shows
Recent forecast revisions suggest a shift in sentiment, with firms like JPMorgan and Goldman adjusting their Mar26 targets up to 1.1800. Notably, recent research suggests notable divergence ahead, as detailed in /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Scotiabank's target at 1.12 implies significant euro weakness ahead.
- 02Institutional conviction grows amidst stronger dollar fundamentals.
- 03Watch for ECB commentary that could impact EUR positioning.
- 04Increased volatility expected as markets digest rate path divergences.
Market implications
Traders should monitor the 1.12 level closely for euro weakness to materialize, especially as US economic data continues to outperform. The next ECB meeting will also be critical for gauging sentiment shifts in the eurozone, which could influence our consensus target if diverging paths emerge.
Risks to this view
A stronger-than-expected eurozone economic performance or a hawkish shift in ECB policy could invalidate the bearish view on EUR/USD. Key indicators to watch include upcoming unemployment rates and inflation data from the eurozone, which could shift sentiment rapidly.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
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