Euro refreshes monthly low against US Dollar as traders price out dovish Fed bets
The Euro has hit a new monthly low against the US Dollar as expectations of a dovish Federal Reserve diminish amid persistent inflation data in the US. This shift has bolstered the USD's position, leading to a bearish sentiment on the Euro. Traders are closely monitoring whether the EUR/USD can break critical support levels as we navigate through this changing economic landscape.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.1750 (median across 11 firms), with Morgan Stanley at the upper end (1.2000) and Citi at the lower end (1.1300). The prevailing trend aligns closely with the bearish sentiment on the Euro reflected in the recent price action against the US Dollar.
How firms align
Firms like JPMorgan and Deutsche Bank share similar views with targets of 1.1800 for March 2026, reinforcing the expectation of continued dollar strength. Meanwhile, BofA takes a more cautious stance, setting their target at 1.1700, which indicates some variability in outlooks among firms. Refer to our reports for detailed assessments from these firms on their positioning.
What the data shows
Recent forecast revisions from Goldman and ING have lifted their March targets for the Euro to 1.1800 and 1.1900, respectively. Notably, our published research shows that EUR/USD is trading significantly below consensus levels, indicating a divergence under current market conditions (/research/eurusd-divergence-consensus-gap-may-2026-20260513-1605).
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD at 1.1500 signals strong dollar momentum; a dip below could mean extended losses.
- 02Watch for EUR/USD breaking critical support levels amid reduced Fed dovishness.
- 03Inflation data from the US is a potential catalyst affecting Federal Reserve policy direction.
- 04Market sentiment leans bearish on the Euro, reflecting the growing divergence of expectations.
Market implications
Investors should keep an eye on the 1.1450 level; a breakdown could pave the way for a deeper retracement in the Euro. Additionally, upcoming inflation reports will be pivotal in shaping expectations for the Fed's policies moving forward, potentially affecting our consensus target of 1.1750.
Risks to this view
A significant improvement in Eurozone economic indicators or a surprising dovish shift from the Fed could invalidate the current bearish outlook on the Euro. Watch for key developments from ECB meetings and US data releases that could alter market sentiment quickly.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
Euro: Limited downside against US Dollar with ECB hike message – MUFG
ECB's continued hike messaging supports EUR/USD floor around current levels; limited downside signals reduced momentum for USD longs.
Euro: Gains capped against US Dollar by Fed story – ING
Fed rate expectations remain supportive of USD strength, structurally limiting EUR/USD upside despite recent euro resilience.
EUR/USD Price Forecast: 20-day EMA remains key barrier as Iran uncertainty persists
Euro slips as Hormuz firefight revives US Dollar demand
Geopolitical risk in Persian Gulf elevates safe-haven demand, likely to support USD/JPY parity and cap EUR/USD downside until tensions clarify.
Bank desks on this topic
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
FX Daily: Iran fall-out coming home to roost in EUR/USD
EUR/USD was hit in March on expectations that the stagflationary shock from Iran would resonate more in Europe than the US. The inflationary effects have been plain for all to see, but this week's release of European PMIs warns that the stagnationary effect is just starting to la
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? - eFXdata
Morgan Stanley: How Much Will FX Hedging Flows Boost EUR/USD? eFXdata
Cross-firm research
EUR/USD Trades 3.16% Below Dec-26 Consensus as 18 Firms Hold 1.20 Median
With spot at 1.1621 and the 18-firm median Dec-26 target at 1.20, EUR/USD sits 3.16% below consensus—a gap that demands explanation.
EUR/USD Trades 3.2% Below Dec-26 Consensus as Targets Cluster Near 1.20
Spot at 1.1612 sits 3.2% below the 18-firm median Dec-26 target of 1.20, exposing a consensus that remains structurally bullish EUR despite the pair's failure to close the gap.
EUR/USD Trades 4% Below Dec-26 Consensus: What the Gap Reveals
EUR/USD spot at 1.1711 sits 4.01% below the eight-firm median Dec-26 target of 1.22, exposing a structural tension between macro conviction and current tape.