Euro Forecasts Raised vs Dollar to 1.20 at Investment Bank

June 26, 2025 - Written by Frank Davies

STORY LINK Euro Forecasts Raised vs Dollar to 1.20 at Investment Bank

Dollar Slumps on Fed Independence Fears, EUR/USD Surges to 45-Month Highs

The US Dollar has been subjected to renewed selling on Thursday with growing concerns that the US Federal Reserve will be politicised with a serious damage to independence. Combined with potential interest rate cuts, this would risk heavy dollar losses.

The dollar index has slumped to the weakest level for over three years while the Euro to Dollar (EUR/USD) exchange rate has surged to 45-month highs around 1.1730.

ING commented; “A clearing of the 1.170 level should set the sights on 1.20, although some further deterioration in US-specific factors may well be necessary to get there.”

UoB maintains some caution; “Strong momentum indicates further EUR strength, but while EUR may break above 1.1700, it remains to be seen if it can maintain a foothold above this level.

According to Scotiabank; “We see limited major resistance ahead of the 1.1720-1.1750 area.”

Nordea has raised its end-2025 EUR/USD forecast to 1.20 from 1.14 previously.


The issue of Fed independence has again leapt to the top of the market agenda over the past 24 hours, especially as an easing of immediate Middle East fears has allowed a greater focus on economic fundamentals.

In the second day of testimony to Congress, Chair Powell stuck to his script and stated that he would maintain a cautious stance towards any cut in interest rates given uncertainty over inflation trends.

The dovish comments from two key Fed members and another attack from President Trump, however, has triggered fresh concerns over a shift to a more political Fed.

Specifically, there is increased speculation over an early move to name a replacement.

On Wednesday, Trump commented on Powell; “I mean he goes out pretty soon, fortunately, because I think he’s terrible.”

ING commented; “Powell continues to attract the heat of the Trump administration, and now that two members (Waller and Bowman, both appointed by Trump) are openly disagreeing with the cautious/hawkish stance, markets may well be quick to respond with a dovish re-rating of expectations to soft US data.

It added; “At the same time, media reports that Trump is considering an early appointment for the next Fed chairman are further bolstering dovish bets.”


Markets are now pricing in over a 90% chance of a September cut and over a 25% chance of a July move.

Commerzbank notes the shift in pricing; “Since last week, additional interest rate cuts of around 12 basis points have been priced in by the end of the year. If the consensus within the FOMC continues to crumble in the coming weeks, this figure is likely to rise. This is not a good sign for the US dollar."

According to IG market analyst Tony Sycamore there is the possibility of short-term relief; "While this stands to be the latest hammer blow to the dollar delivered by the hands of the White House, I do expect it to gain some support in the coming sessions from month-end and quarter-end rebalancing flows."

There are, however, also key uncertainties and potential vulnerabilities on other fronts.

Bank of America notes the clash between fiscal and monetary policy and added; "We are carefully monitoring fiscal policy across key countries that can affect global interest rates. Unsustainable fiscal dynamics can trigger an accident in bond markets."

JP Morgan remains uneasy over tariffs and trade policy; “The risk of additional negative shocks is elevated, and we expect US tariff rates to move higher. The upshot of these developments is that our baseline scenario incorporates the end of a phase of US exceptionalism.”

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TAGS: Euro Dollar Forecasts