Euro heads for weekly loss against US Dollar on hawkish Fed outlook
The euro is positioned for a weekly decline against the USD, fueled by a hawkish outlook from the Federal Reserve that has bolstered confidence in dollar strength. This development highlights the widening interest rate differentials that increasingly favor the dollar amid uncertainty about the ECB's future moves. With the euro currently trading at 1.1446, this trend underscores the diverging monetary policies and suggests continued volatility in the EUR/USD pair.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.1684 (median across multiple firms), with Morgan Stanley projecting the highest target at 1.2000 for March 2026, while Danske Bank offers a notably lower forecast of 1.1100 for December 2026. [fxstreet.com]'s view on the euro’s weakness against the dollar aligns closely with the general bearish sentiment currently prevailing in the market.
How firms align
Firms like Scotiabank and Nomura share an optimistic view of the euro, setting their March 2026 targets at 1.1734 and 1.1700, respectively. In contrast, BNP Paribas has recently adjusted its outlook downward to 1.1600 for March 2026, indicating a more cautious approach. For further insights, refer to our detailed reports on these positions at /research/eurusd-ecb-rate-path-2026-09-18.
What the data shows
Recent revisions highlight that Mizuho raised its March 2026 target to 1.1800, while Scotiabank and BNP Paribas have adjusted their targets downwards, reflecting a shift in sentiment. See more on this adjustment in our report /research/eurusd-ecb-rate-path-2026-09-16.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD set to close the week lower, currently at 1.1446 as Fed's hawkish stance prevails.
- 02Focus remains on interest rate differentials; traders should monitor ECB's rate decisions.
- 03Caution is warranted as March 2026 targets range from 1.1100 (Danske Bank) to 1.2000 (Morgan Stanley).
Market implications
Looking ahead, traders should keep an eye on upcoming economic data from the US that could further influence rate expectations and therefore the EUR/USD trade. A decisive break of 1.1400 could indicate further dollar strength against the euro, alongside our consensus target of 1.1684.
Risks to this view
A reversal in this view could occur if the ECB signals a more aggressive stance on interest rates than expected, or if US economic data disappoints, leading to a reevaluation of Fed's hawkish commitments.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
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Cross-firm research
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