Goldman Sachs
Global FX Strategy 2026
LIVE10 January 2026USD bearish
Back to CurrenciesBullish
EUR/USD
Structural re-rating, not just a USD story
GS Forecast Path
vs Prior ForecastCurrent target: 1.25Prior target: 1.22Revision: +2.5%
Cross-Firm Forecast Comparison
Key Drivers
European fiscal expansion
Fed-ECB rate differential
Relative growth momentum
Real yield convergence
German industrial recovery
All Firm Targets (Dec '26)
GSBullish1.2500
DBStrongly Bullish1.2500
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 expansion is a game-changer for EUR fundamentals
2.EU defense spending coordination adds structural EUR demand
3.EUR/USD has positive convexity to Fed easing
4.European growth convergence with US supports EUR on crosses
5.Fiscal multiplier effects will take 2-3 years to fully materialize
Risk Scenarios
Very bullish1.30+
US recession forces aggressive Fed cuts while European fiscal delivers above expectations
Bullish - GS base case1.25
Fed delivers 75-100bp of cuts, European fiscal expansion gains traction, growth converges
Neutral1.18-1.20
Fed on hold, European fiscal delivers but offset by geopolitical risks
Bearish1.10-1.12
US exceptionalism returns, ECB forced to cut aggressively, fiscal plans delayed
Analysis Summary
Bullish EUR on structural fiscal re-rating in Europe. German defense and infrastructure spending, combined with broader EU fiscal coordination, creates a multi-year tailwind. EUR/USD target of 1.25 reflects both USD weakness and EUR-specific strength. The 'different' part of dollar downside is that EUR captures a disproportionate share.