Euro: Warsh speech weighs on EUR against US Dollar – Danske Bank
Recent remarks from Fed Governor Warsh have exerted downward pressure on the Euro against the US Dollar, reinforcing USD strength in carry trades. Notably, his dovish tone reduces the likelihood of imminent Fed rate cuts, which is key for investor sentiment. As the market digests these comments, the implications for EUR/USD are becoming clear, with support levels for the Euro facing significant challenges amidst broad USD resilience.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across multiple firms), with specific firm targets ranging from 1.1200 to 1.2000. The spread highlights a notable divergence in sentiment, with firms like Danske Bank projecting a lower target of 1.1866 for March 2026, while UBS is more optimistic at 1.2000.
How firms align
Firms such as RBC and Investec are positioned towards the higher end of our spectrum, with March 2026 targets of 1.1600 and 1.1455, respectively, suggesting a more optimistic outlook despite the recent bearish shift from Danske Bank. This positioning contrasts with the tone of Warsh's speech, which has prompted bearish sentiment towards the Euro.
What the data shows
The latest forecast revisions from firms like Morgan Stanley and ING indicate a recalibration towards lower expectations for the Euro, with Morgan Stanley adjusting its March target to 1.2000 but still reflecting lingering caution. For further details, see our recent insights in /research/eurusd-ecb-rate-path-2026-08-30 which discuss the current market dynamics affecting EUR/USD.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Bearish sentiment on EUR/USD increases following Warsh's dovish remarks.
- 02USD remains strong in carry positions against the Euro.
- 03Watch for potential corrections at 1.1500 if bearish momentum holds.
- 04Market expectations on Fed policy are central to EUR/USD movements.
Market implications
Key levels to monitor include the psychological support at 1.1400 and resistance around 1.1675. Upcoming economic releases and Fed communications will be pivotal in guiding future market positioning, particularly as our consensus target of 1.1700 comes under scrutiny.
Risks to this view
Should inflation data prompt a shift in the Fed's tightening stance, it could lead to a rapid appreciation of the Euro. A stronger-than-expected economic report could force traders to re-evaluate their positions, invalidating the current bearish outlook.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD Price Forecast: Gains ground to near 1.1600, bullish vibe prevails above 100-day SMA
EUR/USD retreats from highs while key support holds firm
EUR/USD Weekly Forecast: US rate hike back on the table, US Dollar up
Market repricing probability of additional Fed tightening cycle narrows EUR/USD range and favors dollar strength into data releases.