Global FX: EUR/USD contemplation, GBP fiscal and JPY woes
J.P. Morgan's recent analysis highlights a cautious optimism surrounding the EUR/USD pair, emphasizing potential upward pressure as European economic conditions gradually stabilize. The commentary reflects a broader expectation for the euro to strengthen against the dollar over the coming quarters, supported by a gradual recovery in eurozone economic indicators.
What the desk is arguing
J.P. Morgan's currency outlook underscores a firm belief in the euro's potential appreciation against the US dollar, particularly with targets reaching as high as 1.2200 by December 2026. This perspective is backed by improving macroeconomic data from Europe, which suggests resilience amid global uncertainties.
Additionally, the likelihood of the European Central Bank maintaining a less accommodative stance compared to the Federal Reserve further supports the bullish view on EUR/USD. The desk implicitly counters any bearish outlook by suggesting that recent volatility will not derail the euro's recovery trajectory.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Bullish sentiment on EUR/USD with targets reaching 1.2200 by Dec 2026
- 02Gradual economic recovery in Europe supports euro strength
- 03JPMorgan's targets align with broader market expectations.
Market implications
If J.P. Morgan's outlook holds true, we may see significant positioning shifts in FX markets, with institutional investors increasingly favoring euro-denominated assets. A stronger euro could also influence European export dynamics, creating ripple effects across varied sectors.
Risks to this view
Risks to this outlook include geopolitical tensions in Europe, inflationary pressures leading to unexpected policy adjustments, and potential shifts in US monetary policy that could strengthen the dollar. Any deviation from anticipated economic recovery could also impact the EUR's trajectory.
Arindam Sandilya, Meera Chandan and James Nelligan discuss the outlook for currencies with a focus on the European FX bloc. This podcast was recorded on 14 November 2025. This communication is provided for information purposes only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5131492-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2025 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
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Sources & References
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Cross-firm research
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EUR/USD spot at 1.1727 sits 3.87% below the eight-firm median Dec-26 target of 1.22, exposing a structural divergence that demands explanation.
EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below
Eight sell-side firms hold a median Dec-26 target of 1.22 for EUR/USD while spot trades at 1.1727, a gap that demands explanation.