MUFG
2026 FX Outlook: Post-Peak USD World
Macro Scenarios
MUFG 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
ECB keeps rates too high while Fed stays on hold. Eurozone growth stalls. Least likely scenario given ECB dovish tilt.
Base case. Both central banks ease but German fiscal stimulus lifts EU growth. EUR/USD reaches 1.24 as growth gap narrows.
Fed cuts aggressively to 2.5% while ECB pauses at 2.5%. Rate convergence drives EUR/USD above 1.25.
Most bullish EUR/USD outcome. US recession forces Fed to 1.5%. EUR temporarily above 1.30 before global slowdown weighs.
Most bearish EUR/USD outcome. US growth re-accelerates, Fed hikes. EUR/USD falls back toward 1.08. Low probability tail risk.
USD Macro Scenario Matrix
Growth x Inflation framework for the dollar
USD initially rallies on risk-off but quickly reverses as Fed cuts aggressively. JPY and CHF outperform. EM carry unwinds. EUR benefits from relative resilience if EU fiscal spending cushions the blow.
Worst scenario for risk assets. USD range-bound as safe haven demand offsets growth concerns. Fed constrained. Gold and CHF benefit most. EM devastated.
Central scenario. Fed eases 150bp, DXY declines 5%. EUR/USD to 1.24 on German fiscal boost. JPY normalizes to 146. Commodity currencies rally. EM carry thrives in low-vol environment.
Fed easing delayed but still directionally dovish. DXY still declines but only 3%. EUR/USD reaches 1.20 instead of 1.24. JPY gains more limited. EM carry still positive but reduced.
Strong global growth without inflation. USD mixed as strong US data offset by global risk-on. High-beta FX outperforms. AUD and NOK benefit most. JPY weakens slightly.
Tail risk scenario. US growth surges with persistent inflation. Fed forced to hold or hike. USD rallies sharply. Post-peak thesis invalidated. EUR/USD back toward 1.08-1.10.