EUR USD Forecast Q3 2026: Goldman Sachs Deutsche Bank Analysis

Quick Answer

EUR/USD is trading at 1.074 following the June 2026 ECB rate cut, near a 6-month low. Goldman Sachs forecasts EUR/USD at 1.05 by year-end 2026, driven by the widening ECB-Fed policy rate differential of 175 basis points. Deutsche Bank's FX strategy team is more constructive on the euro, projecting 1.08 by year-end based on eurozone inflation returning to target faster than expected.

ECB-Fed Divergence Driving EUR/USD

The ECB's June 2026 cut to 3.75% versus the Fed's unchanged 5.25-5.50% creates a 175bp policy rate differential — the largest since the early 2000s. This differential incentivises capital flows from euro assets into dollar assets, creating structural selling pressure on EUR/USD. The currency pair has declined from 1.12 in September 2025 (before the ECB easing cycle began) to 1.074 in June 2026, a 4.1% decline over the period.

Goldman Sachs FX Forecast

Goldman Sachs' FX strategy team, led by Kamakshya Trivedi, published a Q3 2026 EUR/USD outlook projecting the pair to reach 1.05 by year-end. Their model is driven by three factors: continued ECB-Fed policy divergence (Goldman forecasts ECB delivers two more cuts vs one Fed cut), eurozone growth underperformance (Goldman projects eurozone GDP at 0.8% vs US 2.1%), and European energy cost headwinds from the Russia-Ukraine conflict legacy. Goldman recommends short EUR/USD positions in carry-adjusted FX portfolios.

Deutsche Bank Alternative View

Deutsche Bank's FX research team holds a more constructive euro view, projecting EUR/USD at 1.08 by year-end. Their analysis emphasises the eurozone current account surplus (+2.8% of GDP in 2025) as a structural support for the euro, European stock market outperformance on a valuation basis, and their view that eurozone inflation will return to target faster than the ECB currently expects — potentially allowing the ECB to pause its easing cycle earlier. Deutsche Bank recommends a balanced EUR/USD position.

HSBC and Barclays Views

HSBC's FX team projects EUR/USD in a 1.06-1.10 range through Q3 2026, noting elevated uncertainty around US fiscal policy and European political developments (French elections, German budget negotiations) as key wildcards. Barclays sees 1.07 as fair value based on purchasing power parity and recommends avoiding large directional EUR/USD positions in the current environment.

Frequently Asked Questions

What is Goldman Sachs EUR USD forecast for 2026?

Goldman Sachs projects EUR/USD at 1.05 by year-end 2026, implying further euro weakness from June 2026 levels around 1.074. Their forecast is driven by ECB-Fed policy divergence (175bp rate differential), eurozone economic underperformance (0.8% vs US 2.1% GDP growth), and European energy cost headwinds. Goldman recommends short EUR/USD in carry-adjusted FX portfolios.

What is Deutsche Bank EUR USD forecast for 2026?

Deutsche Bank projects EUR/USD at 1.08 by year-end 2026, more constructive than Goldman Sachs' 1.05. Their view emphasises the eurozone current account surplus (2.8% of GDP), eurozone equity valuation support, and their expectation that eurozone inflation returns to target faster than the ECB projects — potentially causing an earlier ECB easing pause that would reduce policy divergence with the Fed.

Why is EUR USD falling in 2026?

EUR/USD has declined from 1.12 in September 2025 to 1.074 in June 2026, driven primarily by ECB-Fed policy rate divergence. The ECB has cut rates three times (to 3.75%) while the Fed has held unchanged (5.25-5.50%), creating a 175bp differential — the largest since the early 2000s. This incentivises capital flows from euro assets to higher-yielding dollar assets, creating selling pressure on EUR/USD.

What are the key risks to EUR USD outlook in Q3 2026?

Key upside risks for EUR/USD (euro strengthening): faster-than-expected eurozone disinflation causing ECB to pause easing, US fiscal deterioration weakening dollar confidence, and European equity outperformance attracting capital inflows. Key downside risks (further euro weakness): US inflation re-acceleration forcing Fed to delay cuts, additional ECB easing beyond market expectations, and European political instability (French or German political uncertainty).