Goldman Sachs forecasts a Euro rally driven by dollar weakness, expecting EUR/USD to reach 1.25 - VT Markets
The desk anticipates a significant rally in the Euro, driven primarily by a weakening dollar, with a target of EUR/USD reaching 1.25. Per the full note from Goldman Sachs, this forecast is underpinned by expectations of a shift in U.S. monetary policy that could further erode dollar strength. The current market dynamics suggest that traders are positioning for a potential decline in the dollar index, which could provide the Euro with the necessary momentum to appreciate against the greenback.
What the desk is arguing
Goldman Sachs is positioning itself bullishly on the Euro, citing that a weakening dollar will propel the EUR/USD exchange rate towards 1.25. This perspective underlines the belief that macroeconomic factors will favor the Euro, particularly as central banks navigate their respective policies.
Supporting this forecast, Goldman’s target reflects an increasing consensus among several firms in the market, with expectations varying slightly but favoring a stronger Euro as firms position themselves to capitalize on projected dollar weakness. The firm’s revised projections also suggest a well-anticipated shift that other analysts may be beginning to embrace.
Where it sits in our coverage
Currently, our consensus target for EUR/USD stands at 1.2200 for December 2026, reflecting a range from 1.1700 to 1.2500 among various firms. Goldman’s view aligns closely with this consensus, given that their targets show a steady commitment to long Euro positions through 2026.
Notable targets from some of the firms include: - JPMorgan: Dec26 target at 1.2000 - Deutsche Bank: Dec26 target at 1.2500 - Morgan Stanley: Dec26 target at 1.1600
How other firms see it
Several firms share similar sentiments aligned with Goldman Sachs' outlook, indicating a growing market consensus towards a stronger Euro. These include analysts from various institutions who have recently revised their forecasts upwards.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Goldman Sachs predicts EUR/USD to reach 1.25 due to dollar weakness.
- 02The market is increasingly aligned in its expectations for a stronger Euro.
- 03Consensus estimates suggest a consistent bullish sentiment towards the Euro.
Market implications
Should Goldman Sachs' forecast materialize, traders could see significant impacts on portfolio allocations, favoring Euro-denominated assets and possibly shifting strategies in handling USD exposures. This could lead to volatility in cross-currency trades as market participants react to changing sentiment and positioning.
Risks to this view
The main risks to this Euro bullish forecast include unexpected monetary policy shifts in the ECB or the Fed that could alter interest rate expectations dramatically. Additionally, geopolitical developments or economic data that suggest a stronger dollar could derail current predictions.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2027 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
Sources & References
How we cover this story
Related news on this pair
Euro: Range-bound rebound faces key resistance against US Dollar – Societe Generale
EUR/USD rebound capped by technical resistance suggests limited near-term upside for euro weakness trades.
Euro: Yield spreads hint at recovery against US Dollar – MUFG
Widening EUR/USD yield spreads in favor of eurozone assets suggests technical support for mean reversion; monitor if 10Y differential sustains above 100bp.
Euro: Narrow path for sustained strength against US Dollar – ING
ING assessment of constrained EUR upside signals limited momentum for euro strength; USD positioning likely remains defensive.