Morning briefing: EUR/USD weakness could resume in the medium term
The recent dynamics in the EUR/USD market reveal a complex interplay following both the Fed's and ECB's decisions to maintain their current rates. Despite the dollar's weakening, as highlighted by the Dollar Index dropping from 102.50, the euro's uptick to 1.1253 could be temporary, especially with some analysts predicting a return to previous levels of weakness in the medium term. The consensus among firms shows a broader expectation for the EUR/USD to gradually climb, yet caution remains paramount given the current neutral sentiment across major currencies.
Where it sits in our coverage
Our consensus EUR/USD target currently stands at 1.1700 (median across 12 firms), with CIBC at the upper bound (1.1866) and Wells Fargo at the lower end (1.1200). This positioning highlights a range of expectations from the firms, aligning more closely with a bullish outlook, albeit one tempered by market uncertainties.
How firms align
Firms such as RBC and HSBC have moderate targets around 1.1600 and 1.1700 for March 2026, reflecting an optimistic view that contrasts with the headline's cautionary tone regarding medium-term EUR/USD weakness. Notably, RBC expects the rate to rise to 1.1700 by June 2026, aligning with a more optimistic narrative around the euro's strength while firms like Investec offer a more conservative target of 1.1455 for the same horizon, suggesting divergence in market sentiment.
What the data shows
Recent forecast revisions, including those from Standard Chartered which adjusted their March 2026 target to 1.1400, indicate the potential for recalibrations among firms as macroeconomic factors evolve. Our earlier insights published in /research/eurusd-ecb-rate-path-2026-10-29 reinforce the narrative around the ongoing gap between the spot rate and the median target, suggesting traders remain cautious but expect upward adjustments in the nearer term.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD currently trading at 1.1253, with medium-term weakness anticipated.
- 02Traders should monitor Federal Reserve signals for shifts in the dollar's strength.
- 03Caution is advised; any shift in ECB policy could trigger volatility.
- 04Consensus suggests upward trajectory with a median target of 1.1700.
Market implications
Market participants should watch for upcoming ECB commentary and U.S. economic data, particularly any hints of future rate adjustments, which could significantly impact the EUR/USD direction. Given the consensus target of 1.1700, any clear divergence between actual performance and forecasts may lead to repositioning.
Risks to this view
A shift in ECB policy towards increasing rates prematurely could bolster the euro and invalidate the view of medium-term weakness. Conversely, any surprise uptick in dollar strength due to robust U.S. economic data would pose a significant risk to the current EUR/USD projections.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD forecast: Can ECB rate hike expectations and Lagarde's exit halt the Euro's decline?
ECB leadership transition amid persistent inflation risks and policy uncertainty creates downside EUR/USD risk if successor signals dovish tilt or delayed tightening.
EUR/USD recouped its losses
ECB December hike signal combined with Treasury yield compression supports EUR/USD rebound toward 1.12; watch for consolidation breakout confirmation.
Euro: Supported by limited policy divergence against US Dollar – BBH
ECB pause and dovish pushback on tightening narrows policy divergence, supporting EUR/USD mean reversion above 1.1200 technical level.