Euro: Range-Bound vs Dollar as Growth Gap Narrows — Societe Generale

EUR/USD is currently at 1.16692, with the pair consolidating in a range near recent highs. Kit Juckes, analyst at Societe Generale, notes that the euro has recovered half of its decline from above 1.20 to 1.1325, with markets awaiting fresh U.S. economic data for directional cues. The bank emphasizes that shifts in relative growth expectations are becoming the key driver of the exchange rate — the 2026 U.S. growth forecast has been cut to 2.1%, while the euro area growth forecast has been raised to 0.8%, with the narrowing growth gap prompting adjustments in relative rate expectations.

**Diverging Growth Expectations Bolster Euro Resilience**

According to Societe Generale's analysis, the shifting U.S.-Europe growth outlook is reshaping capital flows. Markets had broadly expected the U.S. economy to maintain its lead, but recent soft data and policy uncertainty have led to downward revisions. Meanwhile, the euro area economy has shown greater-than-expected resilience, driving upward revisions to growth forecasts. This relative shift is directly reflected in rate expectations, in turn providing support for the euro. Related reporting by The New York Times also notes that investor assumptions about the long-term safety and stability of the dollar are being shaken, with some funds rotating into euro-denominated assets.

**Exchange Rate at Key Technical Levels**

From a technical perspective, EUR/USD has previously broken above the 1.1750 threshold and briefly approached the 1.18 level. Societe Generale strategists point to current support at 1.1673 and resistance at 1.1830. The spot price of 1.16692 sits near the support level, indicating that the pair is attracting some buying interest in this key zone. Should U.S. data weaken further, the euro could test the upper resistance again; conversely, if data improves, a deeper pullback toward support areas is possible.

**Euro's Rise Amid Dollar Weakness**

Since the start of the year, the euro has gained more than 11% against the dollar, reaching a four-year high. This rally is not solely due to dollar weakness — the euro has also risen against the yen, pound, and Canadian dollar over the same period, indicating its own momentum is strengthening. However, economists also warn that an excessively rapid euro appreciation could hurt exporter competitiveness, especially against the backdrop of U.S. tariff hikes. Markets are closely watching upcoming U.S. data to gauge the dollar's near-term direction and whether the euro can sustain its strength.