MUFG
2026 FX Outlook: Post-Peak USD World
LIVE19 December 2025USD bearish
Back to CurrenciesBullish
EUR/USD
The fiscal renaissance trade
MUFG Forecast Path
vs Prior ForecastCurrent target: 1.24Prior target: 1.22Revision: +1.6%
Cross-Firm Forecast Comparison
Key Drivers
German fiscal stimulus
ECB terminal rate
US-EU growth convergence
Portfolio rebalancing
Defense spending
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 infrastructure fund and relaxed debt brake create genuine growth impulse
2.ECB terminal rate at 2.25% provides yield support
3.European defense spending adds fiscal tailwind across the bloc
4.Portfolio rebalancing from overweight US to Europe supports EUR flows
5.EUR/USD 1.24 is our top conviction call for 2026
Risk Scenarios
Very bullish1.28-1.32
US recession + EU fiscal outperformance creates rate convergence
Bullish base case1.22-1.24
German fiscal delivery + Fed easing + growth convergence
Neutral1.15-1.18
Fiscal spending delayed, ECB cuts more than expected
Most bearish1.08-1.10
US exceptionalism returns, EU recession, ECB to 1.5%
Analysis Summary
EUR/USD is our top conviction trade for 2026. German fiscal expansion via the infrastructure fund and relaxed debt brake creates a genuine growth impulse. ECB terminal at 2.25% supports EUR yield. Targeting 1.24 by year-end, making MUFG one of the most bullish EUR houses.