FX Talking: Au revoir, euro bulls
The desk views the recent commentary on euro bearishness as reflective of underlying sentiments regarding French fiscal issues and a hawkish Federal Reserve, which reportedly weighs on the euro into early 2027. Per the full note, ING analysts expect the EUR/USD to maintain a tight range of 1.10 to 1.15 in the upcoming months, shaped by inflationary pressures from the US and ongoing political uncertainty in France, notably ahead of the elections. Current consensus shows a median prediction of 1.1700 for March 2026, with notable divergence across firms presenting a range of 1.12 to 1.20, suggesting a cautious stance overall. This mix of sentiment is critical as it unfolds without significant calendar events to act as market catalysts in the short term.
What the desk is arguing
The desk is skeptical about the potential for euro bulls to recover in the near term, asserting that French fiscal concerns could present continuous headwinds for the euro. This view stems from the expectation of firmly entrenched inflationary pressures and a hawkish Fed, which were previously somewhat disregarded by euro bulls at the start of the year. Per the full note, ongoing high inflation and yield pressures indicate a stale bullish sentiment for the euro, positioning EUR/USD firmly within a range of 1.10 to 1.15.
Data from recent consensus targets indicates diverging opinions among FX firms, with forecasts for EUR/USD remaining conflicted as several analysts revise targets to reflect the evolving macroenvironment. Current expectations by ING outline potential stagnation for the euro amid US monetary tightening, reinforcing the view that the upward momentum seen earlier in the year is receding.
The alternative read would be that positive corrective movements could arise from unexpected economic growth signals from the Eurozone or softer-than-expected inflation data from the US, thus pushing EUR/USD beyond the current resistant barriers.
Where it sits in our coverage
Currently, our internal consensus target for EUR/USD is set at 1.1700, with a range spanning from 1.12 to 1.20 by March 2026.
This perspective slightly differs from the broader consensus among firms like rabobank, which sets a target of 1.1759 for the same tenor, and socgen envisioning a more optimistic 1.2000 target. The desk's view aligns somewhat closely with the low of the firm consensus spread, indicating caution amidst the backdrop of political uncertainty in France and the Fed's monetary path.
How other firms see it
Aligning closely with the desk's outlook are firms like mizuho and tmgm, both suggesting targets creeping lower under the current forex pressure. Conversely, firms like cibc and barclays show a more optimistic position, targeting the higher end of the euro trajectory, still reflecting a bullish stance on the long run.
Additional currency pairs to monitor alongside EUR/USD would include USD/JPY, which indicates how broad dollar strength impacts other currencies, and GBP/USD, as EUR correlates with broader European sentiment driven by the BoE's rate path.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING expresses a cautious outlook for the euro, citing French fiscal concerns and a hawkish Fed as recurring headwinds.
- 02The desk anticipates the EUR/USD pair will trade sideways within a 1.10-1.15 range over the coming months.
- 03Current median forecasts suggest a more varied approach to EUR targets, with significant divergence across institutional expectations.
Market implications
Watch for EUR/USD as it aims to hold its ground within the 1.10-1.15 range, particularly as the market digests economic data through the end of the year. Institutional targets set between 1.12 to 1.20 reveal a cautious optimism but signal less confidence in stronger euro moves in the near term.
Risks to this view
A surprising shift in fiscal policies in France or unexpectedly soft US inflation could shift sentiment bullishly towards the euro. Additionally, if the Fed signals any moderation in their hawkish stance, it may lead to renewed buying interest in EUR from institutional traders, invalidating the current bearish outlook.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Reports Report FX Talking: Au revoir, euro bulls Published 11:38 FX Talking French fiscal concerns could keep weighing on the euro into the new year, while the Fed's hawkish stance on inflation should continue to underpin the dollar. We expect EUR/USD to remain in a 1.10-1.15 range in the coming months, but we retain a bullish 2027 view on the pair Chris Turner and Francesco Pesole Download PDF Executive summary Euro bulls are suffering a temporary setback. Having started the year more upbeat on EUR/USD off the back of the dollar debasement trade (remember Greenland?), bulls are now facing a much more hawkish Federal Reserve.
High inflation, high yields and expectations of tighter US monetary policy appear to be staying with us for the next two quarters. Add in French budgetary politics ahead of upcoming elections and EUR/USD should stay soft in a 1.10-1.15 range. FX Talking Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download
Sources & References
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