DOLLAR COULD TAKE ONE FINAL LEG LOWER IN EARLY 2026
According to strategists at SEB, the dollar is poised for one last significant drop in the first quarter of 2026. This decline is anticipated as the regular sequence of data releases resumes following interruptions caused by the recent U.S. government shutdown. Analysts suggest that there may be further pricing of interest-rate reductions in the early part of the year before the market fully adjusts. However, the landscape is complicated by numerous narratives and catalysts, such as the potential for peace in Ukraine, shifts in French political dynamics, critical Supreme Court rulings on tariffs, and challenges to the position of Fed governor Lisa Cook. SEB projects that the euro could strengthen to between $1.20 and $1.21 in the first quarter, up from the current rate of $1.1564.
EURO EXPECTED TO RISE TO $1.25 IN 2026: DEUTSCHE BANK
Deutsche Bank analysts have forecast that the euro could surge to $1.25 by the end of 2026, a notable increase from its current valuation of $1.1563. They attribute this potential rise to a generally positive global growth outlook, a cyclical recovery in Europe spearheaded by Germany, the possibility of a resolution to the Russia-Ukraine conflict, and a robust external economic position. For this upward momentum to materialize, gains in underperforming Asian currencies, especially the Japanese yen and Chinese yuan, are essential, as such appreciation would further pressure the dollar downward. Additionally, the euro’s ascent is likely as global reserve managers begin to appreciate its newfound stature as a safe-haven currency.
