Euro to Dollar Forecast: 1.17 by 2026, 1.24 by 2027 say RBC

May 11, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: 1.17 by 2026, 1.24 by 2027 say RBC

RBC Capital Markets (RBC) forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.17 at the end of this year with a further gain to 1.24 at the end of next year.

EUR/USD dipped to test 1.12 late in the week before a recovery to around 1.1265.

ING noted the importance of 1.12; “a break lower would signal a marked shift in sentiment on the pair and potentially pave the way for larger corrections, with 1.100 being the next big support.”

RBC sees three potential Euro supportive factors. An end to US exceptionalism would underpin the Euro, especially once the Fed does lower rates.

It also sees scope for increased capital flows to the Euro area with a Euro-Zone fiscal stimulus also supportive.

RBC commented; “We have revised up our end-2026 target for EUR/USD in line with a reassessment for allocation to US vs EZ assets.”

It added; “It is very hard calling the timing but we suspect we won’t see EUR/USD trade past 1.20 until the Fed is really able to narrow the s/t rate gap in 2026.”


The US-UK trade deal sparked optimism of a more conciliatory stance by the US Administration which underpinned the dollar.

UBS expects limited benefit; “We continue to view positive trade headlines as supportive for the USD. However, as we expect any dollar strength to be short-lived and anticipate the currency to weaken over the remainder of the year, we favor selling the USD during rallies—specifically below EURUSD 1.12.”

According to ING; “This is still a far cry from the “pragmatic” version of Trump that markets were pricing in as the baseline on Inauguration Day, but it’s enough to prevent growth and debt-related bearish bets on the dollar from mounting.”

The Federal Reserve held interest rates at 4.50% at the latest policy meeting, in line with consensus forecasts. According to Chair Powell, the impact of tariffs will be greater than expected and there is likely to be upward pressure on both inflation and unemployment.

Higher unemployment would increase pressure for a cut in rates, but elevated inflation would act in the opposite direction.

Given these potential tensions, Powell reiterated that the bank needed to be patient and wait for the data to signal the appropriate policy.

Markets cut the potential for a June rate cut to around 20% from near 60% previously.


ING commented; “This week, the Fed sounded anything but dovish. Still, there's a risk that Chair Jerome Powell’s current stance is overly cautious given high uncertainty on tariffs – perhaps to reaffirm the Fed’s independence in the face of Trump’s easing calls.”

According to Danske Bank; “we still think risks are skewed towards downside surprises as front-loaded demand fades and goods supply shortages become increasingly common - especially if reaching an agreement on reducing China-tariffs takes longer than expected.”

It added; “We expect to see majority of the tariff-driven growth slowdown over the course of H2. So even if the Fed opts to remain on hold also in June, we remain confident in our call for three cuts in total for the rest of 2025.”

Westpac expects yields will remain dollar supportive; “We see the next Fed rate cut in September, meaning US rates will stay high compared to peers, including the European Central Bank (ECB), the Swiss National Bank (SNB) and the Bank of England (BoE), which have room to ease.”

Investment banks continued to debate the underlying dollar outlook.

According to Credit Agricole; “We doubt that the role of the USD as the world’s main reserve currency can be challenged any time soon given the lack of credible alternatives.”

It added; “Moreover, even if we were to see the emergences of global trade blocs using their own reserve currencies, the outcome could still favour the USD over the likes of the EUR.”

ING noted underlying uncertainty; “There are reasonable doubts about markets’ readiness to rebuild strategic dollar positions just yet, and time might be needed to reinstall market confidence in the dollar as a safe-haven asset.”

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TAGS: Currency Predictions Euro Dollar Forecasts