Barclays
FX Outlook 2026: Navigating the Turn
Macro Scenarios
Barclays EUR/USD scenario analysis and USD macro framework
EUR/USD Fair Value by Scenario
Base case highlighted in red
Rate Spread Sensitivity
Fed-ECB spread vs EUR/USD fair value
Fed vs ECB Rate Assumptions
Central bank rate assumptions across scenarios
Most bearish EUR/USD. ECB cuts aggressively on growth disappointment while Fed holds.
Gradual rate convergence, limited EUR gains. US growth resilience limits upside.
Base case. Fed eases, ECB at terminal, German fiscal provides moderate boost. EUR/USD reaches 1.19-1.21.
German fiscal multipliers exceed expectations. ECB forced to pause on stronger growth. EUR/USD reaches upper range.
US recession drives aggressive Fed cuts. EUR/USD overshoots to 1.28 but we would fade above 1.25.
USD Macro Scenario Matrix
Growth x Inflation framework for the dollar
USD weakens as Fed cuts aggressively. GBP outperforms as UK resilience stands out. EUR gains modestly. JPY rallies on safe haven. EM carry unwinds but selectively.
Most challenging scenario. USD initially mixed as inflation supports rates but recession undermines confidence. CHF and gold outperform. GBP relative winner in G10.
Base case. USD declines moderately as Fed eases and global growth normalizes. GBP top performer in G10. EUR range-bound with upside bias. EM carry delivers.
Fed constrained by inflation, limiting USD downside. GBP still outperforms on fiscal clarity. EUR range-bound. EM carry selective -- TRY, ZAR work; BRL riskier.
Best environment for risk assets. GBP rallies further on pro-cyclicality. AUD, NOK outperform on commodity demand. EM carry delivers strongly across the board.
Only scenario where USD strengthens. Fed stays hawkish. GBP resilient on relative carry. Low yielders (JPY, CHF, SEK) underperform. EM carry mixed.