Deutsche Bank
FX Blueprint 2026: The Great Rotation
LIVE12 December 2025USD bearish
Back to CurrenciesStrongly Bullish
EUR/USD
The Great Rotation's primary beneficiary
DB Forecast Path
vs Prior ForecastCurrent target: 1.25Prior target: 1.24Revision: +0.8%
Cross-Firm Forecast Comparison
Key Drivers
German fiscal supercycle
Capital rotation
Fed-ECB convergence
Reserve diversification
Growth rebalancing
All Firm Targets (Dec '26)
DBStrongly Bullish1.2500
GSBullish1.2500
MUFGBullish1.2400
INGBullish1.2200
BofABullish1.2200
BARCModerately Bullish1.2100
JPMModerately Bullish1.2000
MSBullish (H1), Fading (H2)1.1600
Key Issues for 2026
1.German fiscal supercycle to add 0.5-1.0%pt to EZ GDP
2.Capital rotation from US to Europe accelerating
3.EUR reserve share bottomed and rebounding
4.EUR/USD 1.25 conservative if fiscal multipliers exceed expectations
5.Rate convergence Fed/ECB to support EUR into 2027
Risk Scenarios
Super bullish1.30+
US recession + full German fiscal delivery + Fed cuts to 2%
Bullish base1.23-1.25
German fiscal delivers, Fed eases gradually, capital rotation continues
Neutral~1.15
European fiscal delays, Fed pauses, capital rotation stalls
Bearish~1.08
European recession, fiscal austerity returns, Fed hawkish pivot
Analysis Summary
EUR/USD to 1.25 is our flagship call. The Great Rotation and German fiscal supercycle create the most bullish backdrop for EUR in a decade. Capital outflows from US assets, narrowing rate differentials, and structural reserve diversification all support EUR strength.