Euro: Softer Fed signals may lift EUR against US Dollar – Commerzbank
The Euro is gaining momentum against the US Dollar as signals from the Federal Reserve suggest a softer monetary stance may be on the horizon. Commerzbank notes that these potential Fed pivot signals could help the EUR recover from recent lows, underpinned by reduced real rate differentials. This shift is significant at current levels, especially as the EUR/USD trades above 1.14, opening the door for a possible uptrend in the coming months.
Where it sits in our coverage
Our consensus target for EUR/USD currently sits at 1.1525 for December 2026, with a median expectation across firms. Firms like Commerzbank have adopted a more bullish outlook, targeting 1.1900 and 1.2000 for March and June 2026, respectively, which aligns with the view of a softer Fed impacting the EUR positively.
How firms align
Commerzbank's targets of 1.1900 and 1.2000 for March and June respectively certainly emphasize a bullish perspective on the Euro, while firms like JPMorgan and Deutsche Bank also hedge towards the higher end, proposing targets at 1.1800 through June 2026. In contrast, firms like BofA are more cautious with a target of 1.1700 for March, suggesting divergence among market expectations.
What the data shows
Recent forecast revisions indicate a tightening range of expectations with several firms adjusting targets upward, particularly BofA and HSBC. For more detailed analysis, you can reference our insights on the EUR/USD rate path: /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD currently trades at 1.1419, with bullish sentiment bolstered by Fed pivot talk.
- 02Traders should note the potential for technical support as the market backs off recent lows.
- 03A softening Fed stance could catalyze a move towards the 1.1900 target over the coming months.
- 04Diverging forecasts may create volatility opportunities for active traders.
Market implications
Next week's Fed decision on July 29 will be crucial for determining market direction, with current consensus at 1.1525 for EUR/USD. Traders should closely monitor position adjustments around the key 1.14 level, which has shown to provide critical support in recent sessions.
Risks to this view
If the Fed signals a more aggressive tightening stance rather than a pivot, or if inflation data undermines the soft outlook, we could see a rapid reversal in the EUR/USD trajectory. Key data releases could serve as catalysts to invalidate the bullish sentiment currently anticipated.
Sentiment by currency
USD EUR+JPY~GBP~Composite USD score: -0.65
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
Euro edges higher against US Dollar, focus is on Fed's policy
Euro: Softer Fed signals may lift EUR against US Dollar - Commerzbank
Dovish Fed pivot narrows rate differential, reducing near-term carry advantage that has underpinned USD strength.