Euro retreats below 1.1650 as inflation data buoys US Dollar ahead of Jackson Hole
The euro has dropped below the 1.1650 mark, influenced by stronger-than-anticipated inflation data from the US, which has reinforced bullish sentiment towards the US dollar as markets prepare for the upcoming Jackson Hole symposium. This movement highlights the ongoing divergence in monetary policy outlooks between the Federal Reserve and the European Central Bank, as investors anticipate possible adjustments to the Fed's rate trajectory. As inflation concerns become increasingly influential in shaping policy expectations, this downturn in the euro reflects broader market sentiments towards continued USD strength.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1700 (median across 8 firms), with Morgan Stanley at the upper bound (1.2300) and Lloyds at the lower (1.1200). FXStreet's view is echoed by multiple firms, primarily aligned with the bearish sentiment on the euro, particularly as inflation dynamics in the US take center stage.
How firms align
Morgan Stanley is notably bullish on the euro in the long term, projecting 1.2000 for March 2026, while firms such as HSBC and UOB show conformity towards a similar bearish outlook as highlighted by their lower targets. For instance, UOB's target of 1.1536 for March 2026 contrasts sharply with the euro's recent price action.
What the data shows
Recent revisions have shown an inclination from firms like ING and UOB towards lower targets, indicating a potential recalibration of expectations surrounding Eurozone inflation and growth conditions. Our published research (/research/eurusd-ecb-rate-path-2026-08-26) discusses the disparity between current spot rates and the consensus targets, emphasizing the ongoing realignment in forecasts regarding the EUR/USD.
How firms align with this view
Key takeaways
- 01EUR traded down to 1.1446, indicating bearish sentiment ahead of significant US economic disclosures.
- 02Inflation data continues to drive USD strength, impacting EU currency valuations.
- 03Watch for upcoming Jackson Hole outcomes to gauge USD interest rate trajectory.
- 04Recent target shifts expose the vulnerability of EUR amidst persistent inflation concerns.
Market implications
Traders should monitor the 1.1440 level as support; a decisive breach could lead to further declines towards 1.1400. Additionally, the Jackson Hole symposium represents a critical catalyst for market sentiment, especially regarding Fed guidance on interest rates. This aligns closely with our consensus target of 1.1700 and recent evaluations.
Risks to this view
A reversal in this view could be triggered by a surprise easing in US inflation metrics or unexpectedly dovish guidance from the Fed at Jackson Hole. Such developments could lead to a rapid shift in USD sentiment, subsequently underpinning a stronger euro trajectory.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
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