Euro to US Dollar Forecast: EUR Breaks 1.16 on Fed Talk

June 24, 2025 - Written by Frank Davies

STORY LINK Euro to US Dollar Forecast: EUR Breaks 1.16 on Fed Talk

EUR/USD Surges Near 44-Month Best as Dovish Fed Talk and Middle East Calm Weigh on US Dollar

Key Takeaways:

• EUR/USD jumped near 1.1600 on Fed dovish comments and Middle East de-escalation.
• Dollar under pressure despite brief rebound after limited Iran-Qatar attack.
• ING, Danske, and UoB diverge on EUR/USD 12-month outlook.
• Market eyes Powell’s testimony Tuesday for signals on July rate cut.

A notable easing of Middle East fears has eroded defensive dollar support while another round of dovish Federal Reserve talk has triggered further US Dollar selling. In the context of Fed speculation, congressional testimony from Chair Powell will be watched very closely on Tuesday.

The Euro to Dollar (EUR/USD) exchange rate surged to 1.1620 and very close to 44-month highs before settling just below 1.1600.

UoB commented; “given the increase in volatility, we now expect EUR to trade in a range of 1.1480/1.1660.”

Danske Bank has a 12-month EUR/USD forecast of 1.22.


ING is still doubtful whether EUR/USD can secure further strong gains; “Barring that, we remain unconvinced that there is enough thrust to keep EUR/USD sustainably bid beyond the 1.1600 mark, considering the calm in the Treasury market and extensive overvaluation.”

The dollar secured a brief move stronger following the Iran attack on a key US base in Qatar, but it faded quickly given that the attack was notably limited and oil prices posted sharp losses.

The dollar then weakened sharply following a reported ceasefire deal between Israel and Iran.

Rodrigo Catril, senior currency strategist at National Australia Bank commented; "It's obviously positive news for risk sentiment. We need to obviously have a bit more detail in terms of exactly what all this means. I suppose it will be the conditions of the ceasefire, and what are the conditions for a more longer-lasting peace deal."

Although underlying uncertainty remains intense and there have been breaches of the ceasefire, Fed talk has been more dominant in markets.

ING is worried over the Federal Reserve stance; “we think a growing dovish front in the FOMC is also doing quite a lot of harm to the greenback.”

Federal Reserve Governor Bowman has shifted position with much more dovish talk.


According to Bowman; “All considered, ongoing progress on trade and tariff negotiations has led to an economic environment that is now demonstrably less risky. we should put more weight on downside risks to our employment mandate going forward.”

She added; “It is time to consider adjusting the policy rate. Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market.”

The comments from Bowman follow similarly dovish comments from Governor Waller.

The shift is notable given that these two previously were leading hawkish voices in the Fed.

Importantly, there will inevitably be speculation that the comments are designed to curry favour with President Trump as he considers the nomination of the next Fed Chair. Trump has also intensified pressure for rate cuts.

IG market analyst Tony Sycamore commented; "There appears to be increasing division among the ranks of the Fed board ahead of Fed Chair Powell's testimony."

The chances of a July rate cut have increased to around 22%.

Sycamore added; "The chance of a July rate cut is still underpriced. I think it should be higher than that."

Markets will be watching very closely to see whether Powell maintains his relatively hawkish stance, especially as Trump has also called for Congressional members to attack Powell.

ING commented; “Crucially, markets may treat any tweaks in Powell’s stance as an indication that Trump’s political pressure has breached the independence shield of the Fed – and that has the potential to drive substantial USD depreciation.”

If Powell holds firm the dollar may gain an element of relief.

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TAGS: Euro Dollar Forecasts