Euro: Energy risks weigh on EUR against US Dollar – MUFG
The Euro continues to face downward pressure, marking a challenging month where it has become the worst-performing G10 currency. MUFG attributes this weakness to rising natural gas prices, which exacerbate energy risks in the Eurozone. As stable spreads and supportive differential factors fail to provide the necessary support for the Euro, market participants are increasingly concerned about the sustainability of the current EUR/USD levels in light of these energy-related risks.
Where it sits in our coverage
Our consensus EUR/USD target currently rests at 1.15 (median across 12 firms), with CIBC at the high end of the range (1.1866) and HSBC at the lower bound (1.1). MUFG's perspective aligns closely with the broader consensus, projecting the same target of 1.1800 for March 2026, indicating a cautious outlook on the Euro in the near term.
How firms align
Several firms reflect a cautious stance towards the Euro's future. For example, Investec's March target is set at 1.1455, while ABN AMRO is even lower at 1.1284. These positions contrast with more bullish targets from firms like CIBC and Commerzbank, suggesting a divergence in outlook.
What the data shows
Recent forecast revisions vary, with Standard Chartered adjusting their target for March to 1.14, reinforcing the cautious sentiment. Notably, our previous analysis in /research/eurusd-ecb-rate-path highlighted that EUR/USD trades significantly below the median consensus, underscoring the prevailing bearish sentiment.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD trades at 1.1253, under pressure from energy market dynamics.
- 02Rising natural gas prices continue to negatively impact EUR performance.
- 03Focus on upcoming ECB meeting for potential shifts in outlook.
- 04Weakening energy support raises concerns for Euro's resilience.
Market implications
Traders should monitor the EUR/USD level around 1.12, particularly as the ECB's upcoming rate decision on October 29 could catalyze shifts. A close below this level may prompt further selling pressure, aligning closely with our consensus target of 1.15.
Risks to this view
A significant drop in natural gas prices or a surprise EUR-positive policy shift from the ECB could reverse the current bearish view on the Euro. Such developments may lead to a reassessment of EUR/USD forecasts upwards from the current figures.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.65
Firms mentioned
Sources & References
How we cover this story
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