Euro: Yield spreads hint at recovery against US Dollar – MUFG
The recent report from MUFG highlights widening yield spreads that favor eurozone assets, suggesting a potential recovery in the euro against the US dollar. With the current EUR/USD spot at 1.1434 and a consensus forecast pointing to an average of 1.1700 by March 2026, this technical support hints at a possible mean reversion. The significance lies in sustaining the 10Y differential above the critical 100 basis points, which could maintain upward pressure on the euro in the near term.
Where it sits in our coverage
Our consensus EUR/USD target is currently 1.1750 for December 2026, which is effectively aligned with various firm perspectives. On the higher end, Commerzbank sees a potential for 1.2200 by December 2026, while Citi's more conservative outlook places the pair at 1.1000 by the same time.
How firms align
MUFG targets 1.1800 for March 2026, supporting the bullish sentiment evident in their recent outlook. Meanwhile, firms like Goldman and JPMorgan also foresee a bullish trend with targets of 1.1800 and 1.1800, respectively, indicating a general agreement on the euro's potential strength. Refer to our internal reports on these firms for deeper insights.
What the data shows
Recent revisions show a bullish shift, notably from Goldman and MUFG, who both revised their March 2026 targets up to 1.1800. This aligns with our analysis published in /research/eurusd-ecb-rate-path, which pointed out that EUR/USD is trading significantly below the December 2026 consensus of 1.20.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD currently at 1.1434, consensus targets suggest upward movement.
- 02Watch for 10Y yield spreads; maintaining above 100bp would support EUR appreciation.
- 03Catalysts include ECB rate paths and economic resilience in the eurozone.
Market implications
Traders should monitor the sustainability of the 10Y yield differential, which if maintained above 100bp could bolster a bullish outlook for EUR/USD. Key economic data releases in the coming weeks may also serve as pivotal points for positioning.
Risks to this view
Any signs of monetary tightening from the Federal Reserve or a strengthening dollar could derail this bullish sentiment. Additionally, geopolitical risks or economic downturns in the eurozone may lead to reevaluation of forecasts.
Sentiment by currency
USD EUR+JPY~GBP~Composite USD score: -0.35
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
Euro: Range-bound rebound faces key resistance against US Dollar – Societe Generale
EUR/USD rebound capped by technical resistance suggests limited near-term upside for euro weakness trades.
Euro: Narrow path for sustained strength against US Dollar – ING
ING assessment of constrained EUR upside signals limited momentum for euro strength; USD positioning likely remains defensive.