EUR/USD spent the week caught between a firm dollar and a slow-burn bullish euro thesis — with research leaning more constructive as the week progressed.
Early in the week, several notes flagged near-term downside: the pair looked capped in the 1.13–1.14 zone, with a broad dollar rally powered by rate differentials and carry, higher energy prices weighing on the euro as an importer, and French political risk seen as a slow-building drag into next year's election. One thread argued a move below 1.14 was plausible if the Fed narrative reasserted itself.
By the second half, the tone shifted. Multiple analysts pointed to the 2-year yield spread turning in the euro's favor, hawkish ECB repricing, and the view that aggressive Fed hike pricing looks overdone. Year-end targets in the 1.17–1.18 area resurfaced, with longer-horizon research pointing to 1.20–1.22 into 2027–28 on fading US exceptionalism and cheaper dollar hedging costs.
A structural bearish euro camp remains, using EUR as a carry funder — worth watching if European equity inflows pick up.