HSBC Research discusses EUR outlook and sees growing downside risks.

"EUR-USD has proved relatively steady despite geopolitical angst. We still see scope for a modest move higher towards 1.18, but the support is narrow: risk appetite is doing most of the heavy lifting and the market remains anchored on near-term ECB hikes. That combination can hold in benign conditions, yet energy remains the near-term risk. Anoth oil or gas squeeze would quickly reopen the EUR's terms-of-trade vulnerability," HSBC notes.

"Further out, the balance of risks still leans against sustained EUR strength. A deteriorating export engine weakens fundamental EUR support, while political risk could rotate back to Europe as the April 2027 French election approaches. Put simply: the EUR can stay stable while the world is co-operative, but it's likely to underperform if energy tightens, growth softens, or markets start pricing earlier-than-anticipated ECB easing in 2027," HSBC adds.