RBC Capital Markets strategists expect the euro to strengthen to $1.24 in the fourth quarter of 2026 from its current $1.1759. They argue the European Central Bank is likely to keep rates unchanged for an extended period, which should support the single currency.
Markets are still pricing in some risk of an additional ECB cut, but RBC sees that fading as the eurozone growth outlook remains resilient. By contrast, the Federal Reserve has resumed rate reductions and signaled more to come, making it cheaper for global investors to hedge against dollar weakness. At the same time, capital flows are shifting away from U.S. assets toward Europe.
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RBC’s euro outlook highlights concern that prolonged currency strength could ease inflation pressures, limiting the need for further ECB cuts. While this policy stability supports capital inflows into European assets, a stronger euro may also weigh on exporters, leaving equities facing a mixed impact.
