Euro to Dollar Forecast for Next Week: EUR to Extend 1.12 Consolidation

May 18, 2025 - Written by Frank Davies

STORY LINK Euro to Dollar Forecast for Next Week: EUR to Extend 1.12 Consolidation

Nordea forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.20 by the end of 2026 and would not be surprised if this level was reached much earlier than this.

ING is far from bullish on the dollar, but expects EURUSD will be held to 1.13 at the end of this year.

The EUR/USD recovered strongly from initial lows near 1.1050 during the week, but there was a fresh retreat to 1.1150 as the dollar found fresh energy.

The dollar bounced strongly following the US-China deal to lower tariffs by 115% points for the next 90 days.

Fears over dollar selling abated and defensive Euro demand also faded.

There are still important underlying concerns surrounding the dollar outlook and whether there has been long-term damage to the outlook.

According to Deutsche Bank; “The fact that China retaliated strongly to US tariffs and made no publicly known concessions to effect the reduction, highlights that we are in very different times.”


It added; “A backtracking on tariffs does not mean the importance of underlying issues has changed, merely that the approach or timing of dealing with them may have. The fundamental overproduction-overconsumption imbalance between China and the US remains large, striking and unsustainable.”

The bank considers that this has important implications; "The significance of this conclusion cannot be over-estimated. We have been arguing over the last few months that the market is reducing its willingness to fund US twin deficits," Saravelos writes. "We worry this is brewing a major problem for the dollar and potentially the US bond market too."

Nordea maintains a bearish dollar stance; “We think the USD will weaken even more. It is facing a trifecta of headwinds: domestic economic slowdown, political uncertainty undermining global trust and upside growth potential in Europe beyond the short term uncertainties.”

It added; “Trump’s public challenges to the Fed’s independence could undermine trust and confidence that the Fed will do its job. If investors begin to doubt the Fed’s commitment or ability to control inflation, they are likely to demand a higher risk premium to hold US assets – adding further pressure on the dollar.”

According to Berenberg; “The extremely uncertain macroeconomic environment is causing companies to postpone recruitment and investment plans. This could drive the economy into stagnation.”

The bank, however, sees little scope for rate cuts; “we believe that the interest rate cuts currently being priced in are somewhat exaggerated.”

At this stage it has a longer-term target of 1.13 for EUR/USD.


It did, however, add; “should the Fed fail to with-stand the attacks from Trump and his supporters, this would further call into question the safe-haven status of the US dollar. In combination with the risk of high US government debt and potential refinancing problems, the US dollar could continue to fall significantly in value in this scenario and reach price levels above 1.20.”

According to SocGen, there has been long-term damage to confidence; “In this instance, we know the U.S. Administration wants a weaker dollar in order to make U.S. manufacturing more competitive. We also know, and will not be able to forget, that foreign ownership of U.S. assets is excessive.

It added; “The world’s investors have too many under-hedged U.S. dollar assets in their portfolios for safety, especially given an Administration that would like to see the dollar weaker.”

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TAGS: Currency Predictions Euro Dollar Forecasts