Euro: Dollar-Driven Factors Still Dominate Price Action – Nordea

Strategists at Nordea note that EUR/USD has already hit the bank's H1 2027 target of 1.12, and they currently expect the dollar to remain strong against the euro. At the time of writing, EUR/USD is trading near 1.12569, slightly above that target, but the pair remains in a dollar-driven dynamic overall.

**Dollar-driven factors still dominate**

Nordea believes that EUR/USD price action is still primarily driven by factors on the dollar side. Feedback from the bank's strategists following client meetings suggests that the market's overall bullishness on the dollar may be higher than publicly stated forecasts imply. Societe Generale also notes that elevated oil and other commodity prices, strong U.S. economic data, and rising global risk aversion have dealt a heavy blow to bearish dollar views, further reinforcing the trend of downward revisions to EUR/USD forecasts.

**Key levels face a test**

The Nordea team warns that the current macro backdrop could soon test key levels. The bank says higher inflation and resilient real-economy data could push the U.S. dollar index to near its 2026 high (just 0.7% away), or press EUR/USD to new lows (just 0.5% away). This suggests that consolidation around the 1.12 target for EUR/USD may not be stable, and if U.S. inflation or economic data continue to show strength, the euro could face further downside pressure.

**Eurozone data impact relatively secondary**

By contrast, the marginal impact of the eurozone's own economic data on the exchange rate has temporarily taken a back seat. Although eurozone indicators such as the Harmonised Index of Consumer Prices (HICP), GDP, manufacturing and services PMIs, and trade balances typically influence the European Central Bank's policy path and thus the euro's direction, these eurozone factors are not yet sufficient to reverse the dollar-driven main theme amid the current broad dollar strength. Market focus remains on U.S. inflation data and the further push from Federal Reserve policy expectations on the dollar index.