US Dollar: Gradual depreciation path versus Euro – BNP Paribas
BNP Paribas has highlighted a structural weakening of the US Dollar against the Euro, suggesting a shift in positioning for traders as the macroeconomic landscape evolves. This bearish sentiment toward the Dollar aligns with growing expectations for continued Euro strength as markets look ahead to 2024-25. The gradual depreciation trend of the Dollar is crucial for traders to monitor, particularly as it may influence cross-currency strategies and positioning.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.1700 for March 2026, which is markedly higher than the current spot price of 1.1500, indicating a bullish outlook aligned with BNP's bearish stance on the USD. The firm-by-firm target range spans from a low of 1.1300 by Citi to a high of 1.2500 from Goldman, showcasing varied expectations but generally leaning toward Euro appreciation.
How firms align
Firms such as Goldman and Deutsche Bank set their March 2026 targets at 1.1800 and 1.1800, respectively, supporting the view of Euro strength ahead. In contrast, BofA's conservative estimate stands at 1.1700, slightly below the consensus but indicative of cautious optimism. Further insights can be explored in our internal reports on those firms at /reports/goldman and /reports/deutschebank.
What the data shows
Recent published research indicated that EUR/USD trades around 3.2% below the consensus target of 1.20 for December 2026, revealing a potential mispricing in the current market dynamics. Further analysis can be found in our insights at /research/eurusd-divergence-consensus-vs-spot-may-2026.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Structural USD weakness noted — long EUR/USD positions favored ahead.
- 02Traders should watch the EUR/USD moving toward 1.1700 in coming months.
- 03A strong US labor report could challenge this bearish USD view.
- 04Monitor central bank signals that might shift sentiment.
Market implications
Investors should keep an eye on the key resistance level at 1.1700 as a breakout point for EUR/USD, in tandem with forthcoming central bank communications from both the ECB and Fed. Our consensus number suggests a potential for upward movement if bullish sentiment prevails.
Risks to this view
A significant reversal in USD fortunes could occur if inflation data in the US surprises to the upside, leading to a more hawkish stance from the Federal Reserve. Additionally, geopolitical factors that strengthen the Dollar could invalidate this bearish outlook.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.55
Firms mentioned
Sources & References
How we cover this story
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https://think.ing.com/articles/fx-daily-iran-fall-out-coming-home-to-roost-in-eur-usd/
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