EUR/USD: Focus on US CPI and Fed cuts – Deutsche Bank - FXStreet

What the desk is arguing

Deutsche Bank believes that the upcoming US CPI report will serve as a critical barometer for the Fed's future policy moves, particularly regarding rate cuts. Should inflation show signs of slowing, the likelihood of the Fed easing its monetary stance could boost the EUR/USD pair, especially as the European Central Bank's position remains relatively hawkish.

Recent market dynamics indicate that the EUR/USD is currently trading below the consensus forecast, suggesting either an undervaluation or a lack of confidence in the euro's ability to rally against the dollar. If the US inflation figures disappoint and the Fed responds with cuts, the euro could regain strength, challenging its current spot price of 1.1500.

Where it sits in our coverage

Our consensus target for the EUR/USD stands at 1.1800 for March 2026, with a range that reaches up to 1.2000. This outlook aligns with several firms' analysis, though there are discrepancies in target prices among the major banks, indicating differing views on the euro's trajectory.

- **JPMorgan**: Dec-26 target of 1.2000 - **Goldman**: Dec-26 target of 1.2500 - **Deutsche Bank**: Dec-26 target of 1.2500

How other firms see it

Several firms share a consensus bullish stance on the EUR/USD, aligning with Deutsche Bank's viewpoint. Key players supporting this upward trend include:

- **Goldman**: Bullish on the euro, anticipating a Dec-26 target of 1.2500. - **Morgan Stanley**: Forecasting a more conservative target of 1.1600 but still positive on the euro's performance.

However, **BofA** holds a contrary position, suggesting a Dec-26 target of 1.2200, indicating skepticism about the euro's potential against the dollar amid potential economic headwinds.