Citi

Global FX Outlook 2026

LIVE9 December 2025USD bullish

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Macro Scenarios

Name: Investment Bank FX Research Directory
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Citi EUR/USD scenario analysis and USD macro framework

Bull Case

Bull Case scenario

Base Case

Base Case scenario

Bear Case

Bear Case scenario

Fair value · Fed path · ECB path · narrative

Bull · 25%

EUR/USD 1.18 — Soft-landing reflation

Fair value1.1800

Fed125bp of cuts through 2026

ECB50bp of cuts, terminal 2.50%

Disinflation holds, US labour cools without recession, ECB stays on hold as core services prove sticky. Real-rate gap collapses, EUR/USD reverts toward PPP-implied fair value above 1.16.

Base · 50%

EUR/USD 1.12 — Orderly Fed easing

Fair value1.1200

Fed100bp of cuts, terminal 3.50%

ECB75bp of cuts, terminal 2.25%

Central case: Fed cuts 4× in 2026 as PCE drifts toward target, ECB cuts a touch more aggressively but euro-area growth surprises positively. Dollar smile flattens.

Bear · 25%

EUR/USD 1.04 — Sticky-inflation re-acceleration

Fair value1.0400

FedCuts deferred to H2-26

ECB100bp of cuts, terminal 2.00%

Tariff pass-through reignites US core CPI, Fed forced to delay; euro-area suffers from energy shock recurrence. Dollar smile bites, EUR/USD undershoots parity-area support.

Scenario probabilities · rate paths · narrative commentary

0 EUR/USD scenarios · fair value, Fed/ECB paths, and narrative unlock with Retail.

FX BANK FORECAST · COVERAGE

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