Euro: Downside risks build against US Dollar as oil rises – Scotiabank
As oil prices rise, downside risks for the US Dollar against the Euro appear to intensify, according to Scotiabank. This dynamic is creating tactical support for the EUR/USD above recent range lows, a crucial development as we approach key economic indicators. With real rate differentials narrowing, it underscores a potentially shifting sentiment toward the Euro, making it a focal point for traders in the current environment.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across a range of firms), with Morgan Stanley at the upper bound (1.2000) and Lloyds at the lower (1.1331). Scotiabank's latest assessment reflects this bullish sentiment toward the Euro amidst supportive oil dynamics.
How firms align
Several firms, including RBC (Mar26 target at 1.1600) and ING (1.1700), align with the Euro's strengthening narrative as highlighted by Scotiabank. In contrast, Stanchart has a slightly more conservative view (Mar26 target at 1.1400), suggesting a divergence in outlook among major analysts.
What the data shows
Recent forecast revisions show increases, particularly from UBS and Morgan Stanley, with both projecting a target of 1.2000 for Mar26. This aligns with our findings from the latest published research (/research/eurusd-ecb-rate-path-2026-09-01), indicating market expectations for heightened Euro strength.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD support emerges as oil prices bolster Euro relative to USD.
- 02Watch for bullish Euro positioning, particularly in light of oil market strength.
- 03Risk of USD reversal if oil prices stabilize or economic data supports USD strength.
Market implications
Traders should monitor the 1.1700 level as a psychological threshold for EUR/USD, especially ahead of key US economic data releases. Consistent pressure on the USD could trigger further rallies in the Euro.
Risks to this view
A reversal in this outlook could occur if oil prices decline significantly or if upcoming US economic indicators suggest robust growth, driving USD's real rate differentials back into favor.
Sentiment by currency
USD EUR+JPY~GBP~Composite USD score: -0.55
Firms mentioned
Sources & References
How we cover this story
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