Deutsche Bank sees euro rising to 1.25 end-2026 (global growth, Europe recover, soft USD) - investingLive
The desk sees a bullish outlook for the euro, projecting it to rise to 1.25 by the end of 2026, driven by global economic recovery and a weakening US dollar. Per the full note from Deutsche Bank, this forecast hinges on expectations of robust growth in Europe and a softening of the USD as monetary policy diverges. The current economic landscape, characterized by improving growth indicators in Europe, supports this view, particularly as the European Central Bank (ECB) maintains a hawkish stance compared to the Federal Reserve. The desk believes that this trajectory will be reinforced by ongoing fiscal support and structural reforms across the Eurozone.
What the desk is arguing
Deutsche Bank sees the euro appreciating to 1.25 by end-2026, underpinned by a more favorable global growth backdrop and a cyclical recovery in Europe. They expect the US dollar to weaken as the Fed eases policy and fiscal stimulus fades.
Supporting this view is the assumption that Europe’s energy crisis will subside and fiscal integration will deepen, boosting the region’s competitiveness. The bank implicitly rejects the notion that structural headwinds like fragmentation risk will keep the euro subdued.
Where it sits in our coverage
Our internal consensus target for EUR/USD end-2026 is 1.075, with a firm spread from 1.04 to 1.12. Deutsche Bank’s 1.25 forecast is far above this range and significantly more bullish than the median view.
Most firms target EUR/USD around 1.10 or lower. For instance: - Barclays: target 1.10 (Dec-26) - JPMorgan: target 1.10 (Mar-26) - Goldman Sachs: target 1.12 (Dec-26) - Morgan Stanley: target 1.04 (Dec-26) - HSBC: target 1.05 (Dec-26) - UBS: target 1.08 (Dec-26)
How other firms see it
Most firms are aligned with a moderate euro recovery but far below 1.25. Goldman Sachs targets 1.12, while Barclays and JPMorgan both see 1.10. These are aligned with the gradual appreciation theme but not the magnitude.
Contrary views include bearish houses: Morgan Stanley forecasts 1.04, and HSBC sees 1.05, arguing that European structural weakness and persistent inflation differentials will cap the euro.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Deutsche Bank forecasts EUR/USD at 1.25 end-2026, well above consensus (~1.08-1.12).
- 02Drivers include global growth, Europe recovery, and soft USD policy.
- 03Most banks see euro gains but not beyond 1.12, with several bearish targets below 1.05.
Market implications
If correct, EUR/USD would break above multi-year resistance, implying significant underperformance of USD and a risk-on environment favoring EM and European cyclical assets. Bond markets would likely price earlier ECB rate hikes.
Risks to this view
Downside risks: Europe’s energy shock persists / ECB keeps rates high, US economy stays resilient, or global recession hits. Upside: Fed cuts aggressively, Europe accelerates reforms.
Sources & References
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