Euro to Dollar Forecasts HIKED to 1.20 at MUFG Over Twelve Month Timeline

April 14, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecasts HIKED to 1.20 at MUFG Over Twelve Month Timeline

During the week, the Euro to Dollar (EUR/USD) exchange rate surged to 3-year highs just above 1.1470 as the dollar came under intense pressure before a corrective retreat to around 1.1360.

The dollar index hit 3-year lows with an 8% slide from January’s peak.

Trump’s latest apparent climbdown on computers may trigger a dollar relief rally, but there is an extremely high element of uncertainty, one important reason why many investment banks have changed their dollar stance.

Goldman Sachs has reversed its position and is now forecasting that EUR/USD will strengthen to 1.20 on a 12-month view compared with the previous forecast of 1.02.

MUFG added; “EUR/USD at 1.2000 a week ago looked too far away to consider but now is certainly reachable.”

According to Danske Bank “We have made a complete reversal in our dollar outlook and now expect the dollar to weaken rather than strengthen.”

It has raised its end-2026 forecast from 1.10.


Goldman Sachs explained its change of stance on the dollar; “First, the combination of an unnecessary trade war and other uncertainty-raising policies is severely eroding consumer and business confidence. Second, negative trends in US governance and institutions are eroding the appeal of US assets for foreign investors. Third, rudimentary calculations and a constant back-and-forth makes it difficult for investors to price outcomes other than high uncertainty.”

President Trump went ahead with imposing so called reciprocal tariffs on the Administration’s target list of countries on April 9th and there were tit-for-tat retaliatory actions as the US-China trade war escalated.

The tariff moves overall sparked fresh selling in equities and the bond market which also undermined the dollar.

All three moved lower in tandem, an unusual and potentially destabilising factor.

The latter was important in spooking overall investor confidence and Trump reacted by announcing a 90-day delay in imposing reciprocal tariffs.

Trump, however, escalated the US-China trade war with 145% of tariffs on some Chinese goods with China raising tariffs to 125% on US goods.

Wall Street rallied and there was a further apparent concession over the weekend with Trump stating that computers and other key electronics goods would be exempt.


Fears surrounding the economy have also undermined dollar confidence.

The University of Michigan consumer confidence index declined sharply to 50.8 for April from 57.0 the previous month and the lowest reading since November 2022, increasing recession fears.

According to Rabobank; “We ran several scenarios for the tariff war with the NiGEM-model and they all lead to US inflation climbing above 4.5% in 2025 and US GDP contracting in the third quarter of this year.”

The 1-year inflation expectations index jumped again to 6.7% from 5.0%, the highest reading since 1981.

The combination of weaker activity and higher inflation will make it very difficult for the Fed to set policy.

At this stage, markets are pricing in around a 75% chance of a June rate cut.

There are strong expectations that the ECB will cut interest rates by a further 25 basis points this week which would take the discount rate down to 2.25%.

Yield spreads could undermine the Euro if market conditions settle and markets will also be watching the Ukraine war situation.

MUFG considers that bond-market vulnerability is another key element.

The 10-year yield spiked to highs around 4.58% before correcting slightly.

According to the bank; “We believe it’s no coincidence that the turmoil has unfolded in the same week that we have had developments in regard to Trump’s proposed tax cut plans.

The House has agreed a budget that extends the 2027 tax cuts. According to the Congressional Budget Office, fiscal measures overall would increase the US debt by at least $5trn over 10 years.

According to MUFG; “The US fiscal deficit is simply out of control and there appears little appetite in Congress amongst Republicans to tackle the issue.”

It added; “The US dollar has also completely detached from rate spreads underlining the crisis of confidence feel to US dollar moves. There are numerous factors that have created these financial market conditions and until some of these are addressed it is difficult to see a turnaround in current market direction.”

According to ING; “One key downside risk for the dollar is if Treasuries accelerate their selloff in an environment where equities remain pressured. If that happens independently from other safe-haven sovereign bonds (like Germany’s bund), that could be an early sign of the “sell America” scenario that can take the dollar substantially lower.”

Danske has been consistently bullish on the dollar over the past two years, but the bank has raised its 12-month EUR/USD forecast to 1.14 from 1.06.

Investment banks have also flagged the risk of sustained US capital outflows.

According to UBS “With US exceptionalism firmly in question now and the Fed likely being forced to act more forcefully, USD weakness has come quicker than we anticipated.”

Rabobank noted that the dollar could still secure defensive support; "The USD’s dominance within the global payments system suggests a surge in demand for the greenback may still occur if investors start to worry about a credit event in the market.

Nevertheless, it added; “For now, however, the story that appears to be dominating flows is the fear that the positive growth outlook for corporate America has come to an abrupt halt under the weight of tariff news. These fears are mingling with concerns that Trump’s aggressive isolationist policies has damaged the country’s reputation."

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