Societe Generale economists have downgraded their 2026 GDP growth forecasts for the Eurozone more sharply than for the United States, highlighting a widening gap in economic performance between the two regions [1]. Specifically, consensus forecasts for Eurozone GDP growth in 2026 have been reduced from 1.2% to 0.8% since the onset of the conflict, while US growth projections have been trimmed from 2.5% to 2.1% over the same period. Although the absolute size of the revision is similar, the relative outperformance of the US is expected to be more pronounced at these lower growth rates [1].
The European Central Bank (ECB) is described as being committed to at least one more rate hike in response to persistent inflation. However, Societe Generale suggests that global central banks, including the ECB, may soon scale back their tightening cycles as economic growth slows [1].
In the currency markets, the Dollar Index (DXY) has fluctuated within a 96-101 range, while EUR/USD has traded between 1.14 and 1.21 during the same period [1]. Looking ahead to the end of 2026, Bloomberg consensus forecasts for DXY, EUR/USD, and GBP/USD stand at 96.7, 1.20, and 1.35, respectively. Societe Generale's own projections are more bearish on the euro, with forecasts of 98.6 for DXY, 1.16 for EUR/USD, and 1.32 for GBP/USD [1].
These revised forecasts underscore concerns about the Eurozone's economic outlook and suggest that the euro may underperform relative to consensus expectations through 2026 [1].
CONCLUSION
Societe Generale's downward revision of Eurozone growth forecasts and its below-consensus EUR/USD outlook highlight persistent economic challenges in the region. The bank anticipates continued US outperformance and a cautious approach from central banks as growth slows. Market participants may need to adjust expectations for the euro and related assets accordingly.