Macquarie’s Bold EUR/USD Forecast: A Strategic Case for Positioning in a Resilient Eurozone

The EUR/USD pair has emerged as a focal point for global investors in 2025, driven by a seismic shift in macroeconomic policy divergence between the Eurozone and the United States. Macquarie Group’s bold forecast—a potential rise to 1.21–1.23—rests on a compelling narrative of fiscal and monetary realignment, positioning the euro as a beneficiary of Europe’s strategic assertiveness and the U.S. dollar’s relative fragility. This analysis unpacks the forces behind this outlook and outlines actionable strategies for investors navigating this evolving landscape.

Policy Divergence: The ECB’s Cautious Easing vs. the Fed’s Dovish Pivot

The European Central Bank (ECB) has adopted a neutral stance, with its deposit rate at 2% as of September 2025, reflecting its confidence in the Eurozone’s disinflationary trajectory (CPI at 2%) and fragile growth outlook [1]. In contrast, the Federal Reserve has cut rates to 4.25%-4.5%, down from a peak of 5.25%-5.5%, amid a cooling labor market and persistent inflation (2.7% year-over-year CPI) [1]. This divergence has created a yield differential that favors the euro, as the ECB’s reluctance to overstimulate the economy contrasts with the Fed’s cautious easing cycle.

Macquarie highlights that the ECB’s fiscal assertiveness—driven by Germany’s structural reforms and Europe’s defense spending commitments—has attracted capital inflows, bolstering the euro’s appeal [5]. Meanwhile, the U.S. faces stagflationary pressures, with a large fiscal deficit and political uncertainty clouding long-term growth prospects [6]. As J.P. Morgan Research notes, the ECB’s accommodative policy and the Fed’s hesitancy to normalize rates could see the euro appreciate by 4% in 2025 [3].

Strategic Positioning: Leveraging Policy Divergence and Technical Catalysts

For investors, the EUR/USD pair offers a unique opportunity to capitalize on both macroeconomic and technical dynamics. Macquarie’s trading strategies emphasize long EUR/USD positions, particularly as the Fed’s 86% probability of a 25-basis-point rate cut in September 2025 weakens the dollar [4]. Key technical levels, such as the 1.1700 threshold and the yearly high of 1.1829, provide clear entry and exit points for traders [4].

1. Long EUR/USD Positions: Investors can target the 1.1700–1.1829 range, supported by the narrowing yield differential and the ECB’s neutral stance. A clean break above 1.1700 could signal a bullish trend toward 1.1800, with stop-losses near the 1.1600 psychological level [4].
2. Options Strategies: Buying call options on the euro with strike prices near 1.1700 offers asymmetric upside potential, particularly if the Fed’s September cut is more aggressive than anticipated [6].
3. Hedging Against Volatility: Political risks, such as France’s budget confidence vote, necessitate short-term hedging via EUR/USD put options to mitigate downside exposure [2].

Geopolitical and Fiscal Tailwinds

Beyond monetary policy, Europe’s fiscal assertiveness—exemplified by Germany’s growth-oriented reforms and increased defense spending—has created a self-reinforcing cycle of capital inflows [5]. Meanwhile, U.S. trade tariffs and geopolitical tensions have dampened investor sentiment toward the dollar, pushing capital into European bonds and equities [1]. Macquarie underscores that this shift in relative value could amplify the euro’s strength, particularly if the U.S. remains focused on deficit reduction at the expense of growth [5].

Conclusion: A Resilient Eurozone in a Divergent World

Macquarie’s EUR/USD forecast is not merely a technical or monetary bet—it is a strategic call on Europe’s evolving role in a multipolar global economy. As the ECB navigates a delicate balance between inflation control and growth support, and the Fed grapples with stagflationary risks, the euro’s resilience offers a compelling case for investors. Positioning in the EUR/USD pair, supported by both macroeconomic fundamentals and technical catalysts, aligns with a broader narrative of fiscal and geopolitical realignment.

Source:
[1] What the US-European Interest Rate Divide Means for ... [https://global.morningstar.com/en-gb/markets/what-higher-us-interest-rates-mean-european-investors]
[2] What policy divergence and politics mean for EUR USD in September 2025 [https://www.myfxbook.com/analysis/what-policy-divergence-and-politics-mean-for-eur-usd-in-september-2025/40550]
[3] The Eurozone's Economic Outlook [https://www.jpmorgan.com/insights/global-research/economy/eurozone-outlook]
[4] EUR/USD Price Targets 1.1700 as Fed Rate-Cut Bets Weaken Dollar [https://www.tradingnews.com/news/eur-usd-price-holds-near-11650-as-sodt-us-jobs-data]
[5] 3 Forex strategists discuss EUR/USD outlook for 2025 ... [https://www.investing.com/news/forex-news/3-forex-strategists-discuss-eurusd-outlook-for-2025-amid-a-massive-regime-shift-3912693]
[6] Still echoes: Rhyming policies, different aftershocks | Insights [https://www.macquarie.com/nz/en/about/company/macquarie-asset-management/institutional-investor/insights/2025/rhyming-policies-different-aftershocks.html]