Euro: Bond sell-off weighs against US Dollar – ING
The recent sell-off in Eurozone bonds has diminished the carry advantage associated with the US Dollar, fostering a bullish sentiment for the Euro. With bonds yielding less, the appeal of USD as a higher-yielding currency is weakening, resulting in upward momentum for EUR/USD. Given this dynamic, we may see further consolidation as market participants recalibrate their expectations surrounding interest rate differentials.
Where it sits in our coverage
Our consensus EUR/USD target is 1.1750, derived from a median across firms, with Morgan Stanley's forecast at the higher end (1.2000) and Citi at the lower end (1.1300). This moves the consensus significantly above the current spot at 1.1500, indicating potential upside in the near term given the recent shifts in sentiment and bond yields.
How firms align
ING's latest forecast aligns closely with the prevailing trend, positioning EUR/USD at 1.1900 for March 2026, indicating bullish sentiment. Similarly, Goldman Sachs also supports this view with a target of 1.1800 for the same tenor. In contrast, BofA’s more pessimistic outlook, targeting 1.1700, suggests a divergence from the consensus optimism, reflecting broader concerns about potential economic headwinds.
What the data shows
Recent revisions have seen Goldman raise its March target to 1.1800, indicating a shift in sentiment, while ING has also adjusted their target upwards to 1.1900. This reinforces our recent findings that highlight the growing divergence between current EUR/USD levels and the December 2026 consensus, as underscored in our analysis (/research/eurusd-divergence-consensus-gap-may-2026-20260513-1605).
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD positioned near 1.1500 with a bullish outlook ahead.
- 02Traders should monitor shifts in Eurozone bond yields.
- 03Watch for economic data that could impact rate expectations.
- 04BofA's lower target indicates a risk to the bullish sentiment.
Market implications
Next week, focus on Eurozone economic indicators that could sway bond markets further. Key levels to monitor include 1.1600 as support and 1.1750 as a psychological resistance level. Our consensus target suggests an appreciation toward 1.1750 could be attainable if the current momentum persists.
Risks to this view
A return to hawkish signals from the Federal Reserve could abruptly alter rate expectations, pushing the USD higher and invalidating the current bullish stance on the Euro. Additionally, any unforeseen economic downturn in Europe could heighten skepticism around Eurozone stability and impact the EUR valuation.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.35
Sources & References
How we cover this story
Other coverage on this pair
Euro: Limited downside against US Dollar with ECB hike message – MUFG
ECB's continued hike messaging supports EUR/USD floor around current levels; limited downside signals reduced momentum for USD longs.
Euro: Gains capped against US Dollar by Fed story – ING
Fed rate expectations remain supportive of USD strength, structurally limiting EUR/USD upside despite recent euro resilience.
EUR/USD Price Forecast: 20-day EMA remains key barrier as Iran uncertainty persists
Euro slips as Hormuz firefight revives US Dollar demand
Geopolitical risk in Persian Gulf elevates safe-haven demand, likely to support USD/JPY parity and cap EUR/USD downside until tensions clarify.
Bank desks on this topic
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
EUR/USD was hit in March on expectations that the stagflationary shock from Iran would resonate more in Europe than the US. The inflationary effects have been plain for all to see, but this week's release of European PMIs warns that the stagnationary effect is just starting to la
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? - eFXdata
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? eFXdata
Cross-firm research
EUR/USD Trades 3.16% Below Dec-26 Consensus as 18 Firms Hold 1.20 Median
With spot at 1.1621 and the 18-firm median Dec-26 target at 1.20, EUR/USD sits 3.16% below consensus—a gap that demands explanation.
EUR/USD Trades 3.2% Below Dec-26 Consensus as Targets Cluster Near 1.20
Spot at 1.1612 sits 3.2% below the 18-firm median Dec-26 target of 1.20, exposing a consensus that remains structurally bullish EUR despite the pair's failure to close the gap.
EUR/USD Trades 4% Below Dec-26 Consensus: What the Gap Reveals
EUR/USD spot at 1.1711 sits 4.01% below the eight-firm median Dec-26 target of 1.22, exposing a structural tension between macro conviction and current tape.