Euro: Extends rebound as yields stabilize against US Dollar - Danske Bank
The euro continues to extend its rebound against the US dollar, buoyed by stabilizing yields, which have reduced the carry advantage of the USD. Danske Bank highlights this rebound as a direct response to market adjustments influenced by ECB hawkish signals, suggesting that further upward movement in yields could intensify this trend. With current spot levels at 1.1446, traders are encouraged to monitor how this dynamic evolves as central banks adjust their monetary policies in the coming months.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1600 (median across 10 firms), with RBC and Deutsche Bank both forecasting a March 2026 target of 1.1700, while MUFG's bullish stance reaches as high as 1.2600. Danske Bank's recent outlook reflects a notable target of 1.1866 for the same tenor, further underscoring a general bullish trend among firms in contrast to the current spot.
How firms align
Firms like JPMorgan and MUFG have demonstrated more optimistic projections, both setting targets of 1.2000 for March 2026, aligning closely with the bullish sentiment noted by Danske Bank, which suggests growing confidence in the euro's trajectory. In contrast, firms like HSBC project a more cautious approach, maintaining a target of 1.1700 for the same tenor, indicating a divergence in outlook amongst analysts.
What the data shows
Recent revisions have generally pointed upwards, with Deutsche Bank adopting a stronger position at 1.1800, and both ING and UOB also adjusting targets higher to 1.1700 and 1.1536, respectively. This continues to reflect a trend of increasing bullish sentiment towards the euro as detailed in /research/eurusd-ecb-rate-path-2026-08-18.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Euro rebounds as stabilization in yields reduces USD carry advantage.
- 02Key level to watch: 1.1500 for potential support.
- 03A hawkish ECB stance could drive euro above 1.1700.
- 04Euro bullish outlook gaining momentum across the board.
Market implications
Going forward, traders should focus on the 1.1500 level as a key support area. Upcoming ECB meetings and any forward guidance on interest rates will be critical in shaping market sentiment. Our consensus number of 1.1600 suggests room for further upward movement if conditions remain favorable.
Risks to this view
The current bullish view could be invalidated by a sudden shift in ECB policy signaling a dovish stance, or a surge in U.S. economic data that prompts a rethink of Fed tightening expectations. Any significant downturn in risk sentiment could also weigh on the euro's strength.
Sentiment by currency
USD EUR+JPY~GBP~Composite USD score: -0.35
Sources & References
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