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Could the Dollar Extend Its Gains Against the Euro? MUFG’s October 2026 Outlook

MUFG sees possible near-term dollar gains against the euro, followed by a projected EUR/USD recovery through 2027. The forecast depends on yields, growth, energy costs and political risks.
From TheFinanceBase Team3 min to read
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MUFG Research sees room for the dollar to gain further against the euro in the near term, but its forecast does not call for a lasting one-way move: it expects EUR/USD to recover through 2027. In the bank’s October 1, 2026 outlook, the September 30 close was 1.1360, and its Q4 2026 forecast was 1.1200. Those are dated observations and projections, not guaranteed exchange-rate outcomes.

What MUFG forecasts for EUR/USD

EUR/USD expresses how many US dollars one euro buys. A lower rate means the euro is weaker against the dollar; a higher rate means it is stronger. MUFG’s September 30, 2026 spot close was 1.1360. Its October 1 outlook projects a dip in Q4 2026 followed by a gradual rise through Q3 2027.

Period MUFG forecast Bloomberg consensus cited by MUFG
Q4 2026 1.1200 1.1600
Q1 2027 1.1400 1.1600
Q2 2027 1.1600 1.1700
Q3 2027 1.1800 1.1800

The figures are quarterly forecasts from MUFG Research’s October 1, 2026 report; the consensus column is the Bloomberg forecast series cited in that report, not a guaranteed market price or the full range of market opinion. MUFG is notably more bearish on the euro for Q4 2026: its 1.1200 forecast is below the cited 1.1600 consensus. By Q3 2027, the two figures match.

Why MUFG sees near-term support for the dollar

MUFG says the dollar strengthened against the euro in September as US yields rose and traders reassessed interest-rate expectations after a Federal Reserve hike and hawkish communication. The report identifies further fixed-income selling as its main near-term market risk: if selling and volatility broaden, elevated US yields could help the dollar extend its gains.

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Several euro-specific pressures add to that near-term case:

  • Energy-price disruption: MUFG warns that disruption and higher energy costs could weigh on European growth and sentiment.
  • French bond-market pressure: The report says the French OAT/Bund spread widened by 42 basis points during September, reflecting weaker sentiment toward French bonds.
  • Political and fiscal uncertainty: MUFG points to uncertainty surrounding France’s 2027 budget and 2027 presidential election as potential drags on the euro.

What could limit the euro’s decline

The outlook also notes signs of resilience in the euro area. The September composite PMI was 53.1, an advance reading and its highest since May 2023. German factory orders increased 2.5% in July, following a 3.7% rise in June. MUFG says this activity data helped limit the euro’s fall during September; it is a counterweight to, not a guarantee against, the risks the bank identifies.

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Why MUFG expects a euro recovery in 2027

MUFG’s projected recovery rests on a change in the forces driving currencies. It expects US yields to reverse lower and rate-hike pricing to recede as US growth slows and inflation subsides. It also assumes political risks will ease. If those assumptions hold, the relative support for the dollar could fade, allowing EUR/USD to rise from the Q4 2026 forecast of 1.1200 to 1.1800 by Q3 2027.

These are assumptions behind a bank forecast, not settled facts. A different path for US rates, energy prices, European activity, or French political and fiscal risks could change the exchange-rate outlook.

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How to use this forecast

For readers tracking the euro or planning a future currency exchange, treat the figures as one institution’s dated scenario—not as a target that the market must reach. A useful comparison with another outlook should keep like with like:

  • Compare the same horizon, such as Q4 2026 with Q4 2026, rather than a spot rate with a later forecast.
  • Check whether each number is an institution’s own forecast or a survey consensus.
  • Compare assumptions about US and European central-bank policy, relative yields, energy costs, euro-area growth, and French fiscal and political risks.
  • Remember that MUFG’s report presents its forecast and cited Bloomberg consensus; it does not establish the full range of market expectations.

Source: MUFG Research, “Monthly Foreign Exchange Outlook – October 2026,” published October 1, 2026. The report uses September 30, 2026 spot closes and identifies Bloomberg as the source for closing rates and consensus forecasts.

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