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MUFG Research sees room for the US dollar to gain further against the euro in the near term, but its forecast turns toward a euro recovery during 2027. In its October 1, 2026 outlook, MUFG recorded EUR/USD at 1.1360 on September 30 and forecast 1.1200 for Q4 2026 before a gradual rise to 1.1800 by Q3 2027. These are dated projections, not confirmed future exchange rates.
MUFG’s EUR/USD forecast, quarter by quarter
EUR/USD shows how many US dollars one euro buys. A lower rate therefore indicates a weaker euro against the dollar; a higher rate indicates a stronger euro. MUFG’s September 30 spot close is an observed rate, while the later figures are forecasts.
| Period | MUFG forecast | Bloomberg consensus cited by MUFG |
|---|---|---|
| September 30, 2026 close | 1.1360 (spot close) | Not stated for spot; the report identifies Bloomberg as its closing-rate source |
| Q4 2026 | 1.1200 | 1.1600 |
| Q1 2027 | 1.1400 | 1.1600 |
| Q2 2027 | 1.1600 | 1.1700 |
| Q3 2027 | 1.1800 | 1.1800 |
All forecast and consensus rates in the table are those published in MUFG Research’s October 1, 2026 report, using September 30 spot closes. The clearest near-term disagreement is Q4 2026: MUFG’s 1.1200 forecast is below the 1.1600 Bloomberg consensus it cites. The two figures match by Q3 2027.
Why MUFG sees near-term potential for dollar gains
Higher US yields and rate expectations
MUFG says the dollar strengthened against the euro during September as US yields rose and markets reassessed rate expectations after a Federal Reserve hike and hawkish communication. Its near-term view depends in part on those pressures continuing to support the dollar.
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Further fixed-income selling
The bank identifies additional fixed-income selling as its primary near-term market risk. If selling broadens and volatility increases, MUFG says the dollar could extend its gains. That is a conditional scenario in the report, not a certainty.
Energy and French political risk
MUFG also sees potential headwinds for the euro from energy-price disruption, which could hurt European growth and sentiment, and from weak French bond-market sentiment. It reports that the French OAT/Bund spread widened by 42 basis points during September. Uncertainty over France’s 2027 budget and 2027 presidential election could, in its view, weigh on the euro.
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What could support the euro instead
The report also points to evidence of resilience in the euro area. The September composite PMI was an advance reading of 53.1, its highest since May 2023. German factory orders rose 2.5% in July, following a 3.7% increase in June. MUFG says this resilience limited the euro’s decline in September.
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Why MUFG expects a euro recovery in 2027
MUFG’s forecast is two-stage, not a call for uninterrupted dollar gains. After projecting EUR/USD at 1.1200 in Q4 2026, it expects the rate to rise through 2027, reaching 1.1800 in Q3. Its rationale is that US yields may reverse and market pricing for rate hikes may recede as growth slows and inflation subsides. The report also assumes political risks will ease.
Those are assumptions underlying the bank’s forecast, not established outcomes. If US yields remain elevated, fixed-income selling intensifies, energy disruption worsens, or French uncertainty persists, the path could differ. Conversely, euro-area resilience could provide more support than MUFG’s near-term forecast implies.
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How to interpret the forecast
- Separate observation from outlook: 1.1360 was the September 30, 2026 spot close; 1.1200 and later levels were forecasts.
- Keep the horizon aligned: compare Q4 2026 with Q4 2026, not a near-term forecast with a year-end or longer-term target.
- Distinguish forecast types: MUFG’s own projection and the Bloomberg consensus it cites are different measures, not interchangeable predictions.
- Compare assumptions as well as rates: assess views on US and ECB policy, relative yields, energy prices, euro-area growth, and French fiscal and political risks.
- Do not treat one report as the whole market: MUFG’s figures show one bank’s outlook and its cited consensus, not the full range of market forecasts.
Source: MUFG Research, “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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