Global Forex Monitor - January 2026: a euro still rising in 2026

The year ended, which was marked by Donald Trump's return to the White House, was eventful. 2026 can be expected to be in the same vein, with persistent geopolitical risks, as shown by the US military intervention in Venezuela and the effective seizure of its oil resources, along with threats against other regions such as Greenland, and Iran. The mid-term elections in November 2026 will prompt Trump to take populist measures to maintain his support and avoid losing the House of Representatives, even possibly the Senate.In 2026, the US dollar will be negatively impacted by the sluggish US economy (GDP growth of 1.8% forecast for this year) and by further Fed interest rate cuts, mainly in the first half of the year, at a faster pace than currently priced in by the market. Among the G10 banks, the Fed will be the most aggressive in terms of lowering key interest rates, which will increase monetary divergence. While the euphoria surrounding AI stocks led to a significant influx of foreign capital at the end of the year, their rich valuations argue for a reduction in these capital inflows in the future. Similarly, persistent public deficits of close to 7% and geopolitical tensions will reinforce investor wariness towards US assets. Against this backdrop, the DXY index can be expected to correct to 96 this year.The EUR/USD rebounded strongly in 2025 in the wake of the US dollar's decline. In 2026, the euro will be supported by the monetary divergence between the ECB and the Fed, with the ECB having completed its cycle of key interest rate cuts. From a macroeconomic perspective, the European economy will continue to expand, with GDP growth of 1.2% forecast by the ECB after 1.4% in 2025. In this context, we remain in favour of a continued appreciation of the EUR/GBP to 1.20 this year.