Deutsche Bank Euro To Dollar Forecast: EUR/USD Heading Above 1.20 In 2026 - Exchange Rates UK
Deutsche Bank reiterates a bullish EUR/USD outlook, forecasting the pair above 1.20 by 2026, aligning with the consensus median but standing out at the higher end of the range. The view challenges near-term pessimism, as spot at 1.15 trades below fundamental fair value estimates.
What the desk is arguing
Deutsche Bank argues that EUR/USD will grind higher above 1.20 in 2026, driven by a narrowing interest rate differential and improved eurozone growth dynamics. The bank sees the pair reaching 1.18 by March 2026, 1.21 by June, and 1.25 by year-end.
This thesis rests on the expectation that the ECB will begin cutting rates later than markets price, while the Fed eases more aggressively, compressing the US-EU rate spread. Additionally, eurozone fiscal expansion and a rebound in manufacturing activity should support the euro.
The desk implicitly rejects the narrative that structural headwinds—such as energy dependence and political fragmentation—will keep EUR/USD anchored below 1.20. Instead, they see these as transient, with the euro undervalued on a purchasing power parity basis.
Where it sits in our coverage
Our internal consensus for EUR/USD shows a Dec-26 median of 1.22, with a firm range from 1.16 (Morgan Stanley) to 1.25 (Goldman Sachs, Deutsche Bank). Deutsche Bank’s 1.25 year-end target sits at the very top of that range, indicating an above-consensus bullish view.
Several firms align closely with Deutsche Bank’s bullish trajectory. For instance: - Goldman forecasts 1.25 for Dec-26. - MUFG targets 1.24 for Dec-26. - ING expects 1.22 for Dec-26.
On the other hand, Morgan Stanley is notably bearish at 1.16 for Dec-26, while Barclays sits at 1.21, nearer to the median. Deutsche Bank’s call is thus at the bullish extreme, alongside Goldman.
How other firms see it
Goldman Sachs is closely aligned with Deutsche Bank, both calling for 1.25 by Dec-26. MUFG (1.24) and ING (1.22) also share a bullish bias, though slightly less aggressive. These firms collectively see euro appreciation driven by catch-up to fair value.
Morgan Stanley stands out as contrary, forecasting Dec-26 at 1.16—well below consensus. They cite persistent eurozone weakness and a stronger USD due to relative growth outperformance. Barclays (1.21) is modestly bearish relative to the median, while JPMorgan (1.20) is also below consensus.
In summary, the majority of our tracked firms lean bullish, but Deutsche Bank’s 1.25 target is among the most optimistic, shared only by Goldman.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Deutsche Bank forecasts EUR/USD above 1.20 in 2026, targeting 1.25 by Dec-26.
- 02This sits at the top of our consensus range (1.16-1.25), aligning with Goldman Sachs (1.25).
- 03Morgan Stanley is the main bearish outlier at 1.16, while most firms range 1.20-1.24.
Market implications
If Deutsche Bank’s view materializes, EUR/USD would rally ~8.7% from current spot (1.15) to 1.25, suggesting long positions are attractive. This could trigger stops above 1.20 and accelerate momentum buying. Conversely, a failure to break above 1.18 near-term may reinforce skepticism.
Risks to this view
Downside risks include a resilient US economy delaying Fed cuts, eurozone recession, or political instability (e.g., French election). Upside risks: a sharper Fed pivot or EU fiscal union progress. Tail risks: tariff escalation or energy crisis.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Scotiabank | Bearish | 1.1200 |
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
Sources & References
How we cover this story
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