Euro gains as US Dollar retreats despite firm PCE inflation, German sentiment improves slightly
The Euro gained ground against the US Dollar today, a move prompted by the Dollar's weakness despite evidence of persistent inflation, as indicated by the stronger PCE data. The slight uptick in German sentiment adds to the positive narrative for the Euro, suggesting that markets may be increasingly optimistic about growth prospects in the Eurozone. This backdrop suggests a market positioning towards a higher terminal rate scenario for the ECB relative to the Fed, emphasizing the divergence in policy stances as we approach key monetary decisions.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1500, with a median target of 1.1700 across firms for March 2026. The targets range from a low of 1.1100 from Citi to a high of 1.2000 from UBS, reflecting a mixed outlook that still trends positively for the Euro.
How firms align
Several firms are echoing an optimistic view for the Euro against the Dollar. JPMorgan and Goldman, with March targets of 1.1800, align well with today's headline, indicating confidence in Euro strength. UBS also adds to this bullish stance with a target of 1.2000 for the same tenor. [PUBLISHER]'s view is on par with these upward projections.
What the data shows
Recent forecast revisions from Scotiabank and JPMorgan highlight an incremental bullish sentiment for the Euro, raising their targets to 1.1734 and 1.1800 respectively. Additionally, our recent publication '/research/eurusd-ecb-rate-path' discusses a significant valuation gap suggesting Euro upside potential.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD trades at 1.1500, reflecting a bullish sentiment.
- 02Watch for further ECB signals to support Euro strength.
- 03Catalyst: Better German sentiment could push the Euro past 1.1700.
- 04Market positioned for an ECB rate hike, diverging from Fed actions.
Market implications
Traders should keep an eye on the resistance around 1.1700 in the EUR/USD pair, as a sustained move above this level could indicate a shift in sentiment. Upcoming Eurozone economic data could serve as a catalyst for further movement in this direction.
Risks to this view
Should the US economic outlook change significantly, undermining the inflation narrative, the Dollar could regain strength, potentially reversing the recent Euro gains. Additionally, any unexpected dovish signals from the ECB could pose risks to the bullish stance on the Euro.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.55
Sources & References
How we cover this story
Other coverage on this pair
Euro stabilizes near 13-month lows against the US Dollar after in-line US inflation data
EUR/USD Price Forecasts: Nearing yearly lows at 1.1330 ahead of US Inflation figures
EUR/USD approaching 2024 lows ahead of US CPI print suggests market pricing USD strength on inflation expectations; watch for breakdown below 1.1330 if data exceeds consensus.
Euro: Stabilising above 1.1300 against US Dollar with risk driver – ING
Euro: Downtrend stretched near 1.1325 against US Dollar – UOB
EUR/USD downtrend extension suggests oversold conditions near 1.1325; watch for mean reversion or fresh bearish catalyst to determine next directional move.
Bank desks on this topic
FX Daily: Looking for stabilisation
Articles FX Daily: Looking for stabilisation 07:32 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Calmer markets are allowing several currencies to take a breather against the strong dollar. If sentiment keeps stabilising from here, data and Fedsp
UBS On-Air: Paul Donovan Daily Audio 'Murky situations'
US Treasury Secretary Bessent warmly endorsed Federal Reserve Chair Warsh, describing Warsh as competent and capable of lowering inflation. Such endorsements are not unusual, but as Warsh had to deny being US President Trump’s “sock puppet” this sort of intervention might shape p
FX Daily: AI jitters add fuel to USD rally
Articles FX Daily: AI jitters add fuel to USD rally 08:08 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Equity turmoil is adding to the dollar’s strong momentum, which is also benefiting from hawkish Fedspeak. The ECB’s Lane tried to
Rates Spark: Bonds back to hedging market risks
Articles Rates Spark: Bonds back to hedging market risks 07:26 Rates Spark Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Lower oil prices should give investors more confidence in holding bonds as a hedge against equity downturns. If AI jitters were