EUR/USD Eyes 1.18 Handle as Yield Differentials Narrow Across the Atlantic
Improving Eurozone PMI surveys and softer US rate expectations lift the single currency above 1.1600, prompting corporate treasurers to revisit FX hedges.
Lucas Meyer
Head of Global FX · Vizyon Capital
Foreign exchange desks are witnessing a steady rotation out of crowded long-dollar positions. EUR/USD pushed above 1.1600 this week, while GBP/USD stabilized near 1.3200 and USD/JPY oscillated around 154.40 amid heightened sensitivity to Bank of Japan commentary.
Narrowing spread dynamics
For much of the past two years, wide US-German 2-year yield differentials anchored dollar strength. As US disinflation progresses alongside stabilizing European industrial activity, that yield advantage is compressing by roughly 35 basis points from Q3 peaks.
In emerging markets, high-carry currencies including the Turkish lira (USD/TRY near 42.68) continue to attract structured carry inflows supported by rebuilding central bank reserves.
Vizyon Capital FX projections
Our FX Desk projects EUR/USD reaching 1.1800 in Q1 2026 with technical support firmly planted at 1.1480. Multinational treasurers with unhedged euro payables are advised to layer forward coverage on dips toward 1.1520.
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