Euro: Softer against US Dollar as yields climb – Danske Bank
The Euro has weakened against the US Dollar as rising yields favor the greenback, underscoring a bearish sentiment towards EUR/USD. With the Fed maintaining a hawkish stance and the ECB facing pressure on its monetary policy, the widening rate differentials amplify the downside risk for the Euro. Danske Bank's insight highlights how investors should keep an eye on any divergence in ECB signals compared to the Fed's tightening bias, which currently favors further USD strength.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.1700 (median across 10 firms), reflecting the general bullish outlook among firms such as Goldman (1.1800) and JPMorgan (1.1800) at the higher end, while Citi holds the lower target at 1.1300. This positioning indicates a belief in a potential recovery of the Euro against the dollar despite the pressures highlighted in the market.
How firms align
Firms like Goldman and Morgan Stanley project EUR/USD will strengthen to 1.1800 and 1.2000, respectively, aligning with a more optimistic view compared to Danske Bank's assessment. Conversely, Citi's forecast of 1.1300 suggests a more negative outlook, reflecting caution in light of rising US yields. For further details, see our internal reports on these firms: /reports/goldman and /reports/citi.
What the data shows
Forecasts have diverged somewhat, with some models adjusting their expectations downward. Recent research notes that EUR/USD is trading approximately 3% below the December consensus of 1.20, highlighting ongoing market skepticism about the Euro's prospects (/research/eurusd-ecb-rate-path).
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD at 1.1500 indicates vulnerability amid US yield increases.
- 02Watch for ECB's communication on rate policy as a key driver.
- 03Any surprise signals from the Fed could shift this dynamic significantly.
Market implications
Traders should focus on the 1.1500 level for EUR/USD, as sustained weakness could pave the way to retest 1.1400. Upcoming ECB meetings will be pivotal in determining how the market prices future rate expectations, particularly in relation to the Fed's trajectory.
Risks to this view
A reversal in this view could occur if the ECB adopts a more aggressive posture on rate hikes, signaling a shift from its current stance. This may occur sooner than expected, particularly if inflation data in the Eurozone exceeds forecasts.
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 slips against the US Dollar as upbeat US economic data reinforces hawkish Fed bets
Strong US data firming Fed hawkish repricing widens USD/EUR rate differential, pressuring euro from both policy divergence and growth momentum.
EUR/USD Price Forecast: Tests 1.1600 amid flaring geopolitical tensions, higher Oil prices
Geopolitical risk premium and oil strength typically support EUR/USD upside as energy importer dynamics shift; monitor if Fed policy divergence accelerates the move.
Eurozone and Germany Composite PMIs revised higher: Here's what it means for EUR/USD
Upward PMI revisions signal stronger-than-expected eurozone activity, supporting ECB hawkish bias and EUR/USD upside.
Euro: Downside risks within range against US Dollar – UOB
UOB identifies EUR/USD downside risks; range-bound setup suggests asymmetric short exposure warranted near resistance levels.
Bank desks on this topic
Dollar faces renewed strength if US-Iran talks fail, MUFG warns
MUFG analysts warn the dollar could strengthen further if US-Iran talks collapse, with energy-driven inflation risks potentially pushing Fed officials toward a more hawkish stance and lifting US yields. - The US dollar faces renewed upward pressure if Washington and Tehran fail t
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