Euro: OAT repricing keeps downside bias against US Dollar – MUFG
The Euro is facing continued bearish pressure against the US Dollar, chiefly due to the recent repricing of French OATs which has widened spreads versus US Treasuries. This market adjustment highlights a prevailing risk-off sentiment that tends to favor dollar assets, as indicated by MUFG's analysis. The current spot rate of 1.1253 shows a significant divergence from the consensus forecasts that project EUR/USD up to 1.1700 by March 2026. Such dynamics underscore the euro's vulnerability while investors seek safety amidst economic uncertainties.
Where it sits in our coverage
Our consensus EUR/USD target is notably bearish at 1.1634 (median across 12 firms), with CIBC at the upper end of the spectrum at 1.1866, while Lloyds is positioned lower at 1.1200. MUFG's stance aligns with the prevailing downside sentiment, reflecting a growing market caution that favors the greenback over the euro.
How firms align
Specific firms like RBC and Rabobank project a more bullish outlook for the euro, with targets at 1.1700 for March 2026, suggesting potential upside. In contrast, Mizuho maintains a conservative stance with a target of 1.1300, reflecting a cautious view toward euro strength. This divergence in expectations indicates a significant variation in sentiment across the market, as highlighted in /research/eurusd-ecb-rate-path-2026-10-07.
What the data shows
Recent forecast revisions exhibit an inclination toward a weaker euro, with firms like Mizuho adjusting their March 2026 target downward to 1.1500. This aligns with our insights in /research/eurusd-ecb-rate-path, which illustrates the disconnect between current spot levels and longer-term expectations.
How firms align with this view
Contrary positioning
Key takeaways
- 01EUR/USD faces pressure; current spot at 1.1253 vs. 1.1634 consensus target.
- 02Bearish sentiment keeps EUR under pressure as spreads widen amid risk-off mode.
- 03Key level to watch: 1.1200 supports bearish outlook; failure to hold could alter sentiment.
Market implications
Investors should monitor the euro's performance around the 1.1200 level, as a decisive break below could solidify the bearish trend. Upcoming economic data releases, particularly from the Eurozone, may influence investor perception and positioning. Our consensus remains at 1.1634 for December 2026, indicating potential upside if sentiment shifts considerably.
Risks to this view
An unexpected dovish turn from the Federal Reserve could reverse the dollar's strength, potentially bringing the euro back into favor. Moreover, any significant positive economic surprises from the Eurozone might force a reassessment of the current bearish outlook.
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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