MUFG Research sees room for the dollar to strengthen further against the euro in the near term, but its October 2026 forecast also calls for EUR/USD to recover during 2027. The bank’s September 30 spot close was 1.1360; it forecast 1.1200 for Q4 2026 before a gradual rise to 1.1800 in Q3 2027. These are dated projections, not guaranteed exchange-rate outcomes.
What is MUFG forecasting for EUR/USD?
EUR/USD shows how many US dollars one euro buys. A lower rate means a stronger dollar relative to the euro; a higher rate means a stronger euro. MUFG’s October 1, 2026 outlook uses a September 30 spot close of 1.1360 as its starting point.
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| Period | MUFG forecast | Bloomberg consensus cited by MUFG |
|---|---|---|
| Q4 2026 | 1.1200 | 1.1600 |
| Q1 2027 | 1.1400 | 1.1600 |
| Q2 2027 | 1.1600 | 1.1700 |
| Q3 2027 | 1.1800 | 1.1800 |
The figures are MUFG Research forecasts and Bloomberg consensus values reported in its October 1, 2026 outlook; they are not current spot quotes. The clearest difference is for Q4 2026: MUFG’s 1.1200 forecast is below the 1.1600 consensus it cites. By Q3 2027, the two figures match.
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Why does MUFG see near-term scope for dollar gains?
MUFG says the dollar strengthened against the euro in September 2026 as US yields rose and markets reassessed rate expectations after a Federal Reserve hike and hawkish communication. Its main near-term market risk is further selling in fixed-income markets. If that selling broadens and volatility increases, the report says the dollar could extend its gains.
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Energy and European sentiment
The report also sees energy-price disruption as a potential threat to European growth and sentiment. This is a risk to the euro rather than a certainty about the region’s economic performance.
French bond and political risks
MUFG reports that the French OAT/Bund spread widened by 42 basis points during September. It also identifies uncertainty over France’s 2027 budget and presidential election as potential pressures on the euro. The spread figure describes the change reported for that month, not a forecast of how the gap will move next.
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What could limit the euro’s decline?
MUFG points to signs of euro-area resilience that helped limit the euro’s fall in September. The report cites an advance September composite PMI reading of 53.1, the highest since May 2023, and German factory orders rising 2.5% in July after increasing 3.7% in June. These indicators offer counterweight to the risks the bank identifies; they do not settle the currency’s direction.
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The later part of MUFG’s forecast depends on its expectation that US yields will reverse and markets will price out some rate-hike expectations as growth slows and inflation subsides. The bank also expects political risks to recede. If those assumptions hold, it sees EUR/USD rising from its Q4 2026 forecast through Q3 2027. They remain assumptions behind a forecast, not established future events.
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How to interpret the forecast
- Separate the observation from the projection: 1.1360 is the September 30, 2026 close; 1.1200 and later values are forecasts.
- Keep the horizon in view: MUFG’s near-term dollar-strength call is followed by a projected euro recovery, not uninterrupted dollar gains.
- Compare like with like: Match forecast dates and distinguish a bank’s own forecast from a survey consensus. MUFG’s report provides its figures and the Bloomberg consensus it cites, but does not establish the full range of market views.
- Track the assumptions: Relative US yields and policy expectations, European activity, energy prices, and French fiscal and political risks are central to the report’s reasoning.
MUFG’s source is “Monthly Foreign Exchange Outlook – October 2026”, published October 1, 2026. The report identifies Bloomberg as the source for closing rates and consensus forecasts.
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