Morgan Stanley forecasts EUR/USD to reach 1.23 by spring before falling - Investing.com UK
Morgan Stanley's latest projection for EUR/USD indicates a bullish outlook, forecasting the pair to reach 1.23 by spring 2026 before a subsequent decline. This call reflects confidence in the euro's relative strength against the dollar amid expected changes in monetary policy and economic indicators.
What the desk is arguing
Morgan Stanley's expectation for EUR/USD to hit 1.23 by spring highlights a significant bullish sentiment, supported by anticipated interest rate dynamics and economic recovery in the Eurozone. The firm is leaning on factors such as potential easing of U.S. monetary policy and sustained economic growth in Europe as catalysts for this upward movement in the exchange rate.
However, they also caution that after reaching this peak, a retracement is likely, suggesting a more complex interplay of market factors that could lead to a decline later in the year. This view potentially contrasts with other market participants who remain more conservative in their expectations for the euro's strength against the dollar going into 2026.
Where it sits in our coverage
Currently, the consensus target for EUR/USD across various firms stands at 1.1800 for March 2026, with a range between 1.1700 and 1.2000, reflecting a more moderate outlook than Morgan Stanley's bullish forecast. Their own target aligns closely with the upper end of that range but suggests a strong upward momentum from current levels, which could create divergence in market sentiment.
Notably, several key players project targets close to Morgan Stanley's, but with slight variations: - JPMorgan: Mar26 1.1800 - Goldman: Mar26 1.1800 - MUFJ: Mar26 1.1800
How other firms see it
Several other firms maintain a more cautious tone regarding the euro's outlook against the dollar, reflecting the potential for macroeconomic headwinds. For instance, BofA projects a more conservative Mar26 target of 1.1700, indicating they are aligned with a bearish view overall.
Conversely, some firms take a more optimistic stance, although their targets still fall short of Morgan Stanley's bullish expectations: - Goldman: Mar26 1.1800 - ING: Mar26 1.1900 - MUFJ: Mar26 1.1800
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Morgan Stanley projects EUR/USD to reach 1.23 by spring 2026 before declining.
- 02This perspective reflects anticipated changes in interest rate policies and Eurozone economic growth.
- 03Market consensus remains more conservative, with targets primarily around 1.1800.
Market implications
If Morgan Stanley's outlook materializes, it may prompt adjustments in positioning among traders, particularly those betting on dollar strength. A solid movement towards 1.23 could also ignite options activity and reshape hedging strategies within forex markets as investor sentiment adapts to new projections.
Risks to this view
The primary risks to this bullish outlook include unexpected changes in U.S. economic data that could prompt the Federal Reserve to maintain higher rates for longer, alongside any adverse developments in the geopolitical landscape that could impact European economic stability. Additionally, the timing of monetary policy shifts will be crucial in determining the validity of Morgan Stanley's forecast.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
Sources & References
How we cover this story
Related news on this pair
EUR/USD Weekly Forecast: Greenback holds firm despite looming US political stalemate
USD resilience despite US political uncertainty suggests safe-haven demand remains the dominant driver; EUR/USD breakdown below 1.1200 month-range may accelerate if risk sentiment deteriorates.
Euro: Rotation into Dollar cash caps gains against US Dollar – ING
EUR/USD upside capped by continued dollar cash rotation despite US tech weakness; Treasury correlation reassertion limits euro tactical strength.
EUR/USD Price Forecast: Declines below 1.1200 as bearish bias holds below key technical resistance
EUR/USD breaks below 1.1200 technical level ahead of data events; watch for Eurozone retail sales and US nonfarm payroll reactions.