Euro to Dollar Rate Forecasted Further Gains as EUR Nears 43-Month Best

June 17, 2025 - Written by David Woodsmith

STORY LINK Euro to Dollar Rate Forecasted Further Gains as EUR Nears 43-Month Best

The Euro to Dollar exchange rate (EUR/USD) found support around 1.1525 on Monday and advanced to around 1.1580, within reach of its 43-month high of 1.1600, which was posted last week.

The U.S. Dollar has not been able to find sustained support in global markets with selling on rallies despite on-going Middle East tensions. Oil prices edged lower on Monday with net gains for equity markets.

Given the multiple domestic and global risks, choppy trading is inevitable and any Middle East escalation would risk very substantial moves across currency markets

ING commented; “The USD bounce since the Israel-Iran strikes started has been relatively contained and is now being largely unwound. That is despite no signs of de-escalation in the region and oil prices staying supported. In our view, that is once again the symptom of the market’s distrust in the dollar at the moment.”

The bank, however, also noted that the pair is heavily over-valued, limiting scope for further gains; “the short-term fair value is just below 1.110 according to our model, and moves above 1.1640 would send the pair beyond the three-standard-deviation upper bound.”

Markets will continue to monitor Middle East developments in the short term as Israel and Iran continue to exchange military strikes.

Rabobank noted the risk of a major escalation such as blocking the key oil transit route through the Straits of Hormuz.


It noted; “Closing Hormuz would disrupt up to one-third of global oil supplies, which our own analysts estimate could result in oil prices of $120-$150/bbl. Closure of the Strait would also impeded natural gas flows from Qatar into Europe, further exacerbating the negative terms of trade shock experienced through the energy complex for the EU, while giving a big boost to alternative suppliers USA and Australia.

This development would pose major downside Euro risks.

The Federal Reserve will announce its latest interest rate decision on Wednesday with strong expectations that rates will be held at 4.50%.

Guidance from the Fed and the latest economic projections, including interest rate forecasts, will also be important for dollar sentiment.

Updated forecasts from the Fed will inevitably be a key factor. At the previous update in March, the median forecast was for two rate cuts in 2025 with a further two cuts in 2026.

Brown Brothers Harriman global head of markets strategy Win Thin commented; "If the Fed delivers a dovish hold as we expect, the dollar is likely to resume weakening due to the worsening fundamental backdrop in the U.S."

MUFG sees scope for further caution; “we are not convinced that the Fed will be ready yet to signal that they are planning to resume rate cuts as soon as at the following FOMC meeting in July in light of heightened trade policy uncertainty.”


According to Chris Weston, head of research at Pepperstone; "What you're going to see from their growth forecasts is that the shift towards lower growth is very much upon us and that will keep the statement fairly neutral."

MUFG points to the wider issue of the next Fed Chair with Powell’s term due to end in May 2026.

President Trump will inevitably criticise the Fed heavily if there is no rate cut this week. He may also move closer to nominating a new Fed Chair to help influence market opinion.

MUFG commented; “Downside risks for the USD would increase further if he chooses a candidate who is perceived as more of a “yes man”.

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TAGS: Euro Dollar Forecasts