Euro to Dollar Forecast: EUR Rebounds, Consolidation ~1.120 Ahead

May 14, 2025 - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: EUR Rebounds, Consolidation ~1.120 Ahead

The Euro to Dollar exchange rate (EUR/USD) slumped to lows below near 1.1050 on Monday after the US-China deal to lower tariffs substantially for a 90-day period.

The dollar, however, failed to hold gains and EUR/USD has rallied strongly back above 1.1200 to test 1.1250 with reservations surrounding the dollar still in evidence.

According to ING, EUR/USD will struggle to make further headway; “We expect some stabilisation around 1.120 in EUR/USD over the coming days.”

It expects a wider 1.10-1.15 range during this quarter.

UoB considers that the move above 1.1225 increases the chances that the pair is now in a consolidation phase.

Danske Bank still expects strong EUR/USD buying on dips; “While the easing of trade tensions provides a near-term tailwind for the USD, the risk remains that incoming data deteriorates quickly. We maintain that concerns over the US hard-data outlook are valid, and asset allocation shifts away from US assets remain medium- to longer-term headwinds for the greenback.”

SocGen expects gradual EUR/USD gains to 1.17 at the end of this year.


On a short-term view, Commonwealth Bank of Australia commented; "Despite the easing of the USD overnight, we consider there is more upside to the USD in the near term as market participants reassess the outlook for the U.S. and global economies following the temporary U.S.-China trade deal."

It sees scope for a 2-3% dollar gain over the next few weeks.

It did, however, add; "we do not expect a full recovery in the USD back to levels traded at the start of the year. Erratic policy making in the U.S. has probably caused some permanent damage to the USD's status as a safe-haven currency."

The debate surrounding underlying structural dollar weakness remains a key market element.

ING commented; “There are likely lingering concerns that positive trade-related news may soon be out-shadowed by hard evidence of the damage already done to the US economy, and there may not be enough incentive to chase dollar rebounds until clarity on the impact of tariffs has emerged.”

MUFG noted that central bank figures have played down the potential for the dollar losing its reserve status.

In comments on Tuesday, Bundesbank head Nagel noted; "The dollar is very important for the world financial system, we still need a strong dollar.”


According to MUFG; “We agree with that and there are certainly examples of longer-term periods of US dollar depreciation that does not necessarily mean the dollar’s reserve status is being lost. Still, reserve holdings could well continue to decline gradually going forward.”

The bank, however, considers that the huge number of negative-yielding bonds in the 2019-2022 period was a key element driving the dollar higher.

MUFG added; “Negative yielding fixed income is a thing of the past now and that will allow for the dollar to retrace from historically over-valued levels. The euro stands to be a key beneficiary of that.”

Markets are now pricing in less than a 50% chance that the Federal Reserve will cut interest rates from 4.50% by July

The ECB has cut the deposit rate to 2.25% and markets expect a further cut in June.

ING notes that yield spreads will limit scope for EUR/USD gains; “the euro is not particularly well positioned to benefit from it as the ECB continues to cut.”

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TAGS: Euro Dollar Forecasts