Euro to Dollar Forecast: Another 5pc Fall for USD Around the Corner?

July 1, 2025 - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Another 5pc Fall for USD Around the Corner?

The US Dollar (USD) has remained under pressure in currency markets while the Euro (EUR) has posted further gains on the crosses.

The Euro to Dollar has hit fresh 45-month highs at 1.1830 before consolidating just above the 1.1800 level.

The dollar is being hurt by growth, trade and budget fears.

According to Capital Economics; “We suspect that this could be a pivotal period for the greenback – either it turns around here or there is another 5pc fall around the corner.”

US yields have moved lower with the 10-year yield around 4.20% and close to 2-month lows which has sapped dollar support.

According to ING; “Technically, there's not much resistance now until 1.1900. But the trend is a little stretched, and we would warn against buying top-side breakouts. Instead, expect good buying to come in should EUR/USD correct back to the 1.1690/1720 area.”

UoB commented; “Based on the current overbought momentum, EUR is unlikely to threaten the next resistance at 1.1850.”


It added; “Support is at 1.1750; a breach of 1.1730 would suggest the upward momentum is fading.”

Against a basket of major currencies, the US currency declined 10.7% in the first half of 2025. This is the weakest first half of a year since the end of the gold standard system in 1973.

The Euro has certainly taken advantage of dollar vulnerability. Looking at a basket against the Dollar, Euro and yen, the Euro has strengthened to the strongest level for 25 years.

On a shorter-term perspective, EUR/USD has strengthened for eight consecutive days and another gain to on Tuesday would equal the record breaking run for the single currency.

This will leave the currency vulnerable to at least a near-term setback.

A key problem for the dollar is that it appears to be vulnerable on multiple fronts.

Luca Paolini, chief strategist at Pictet Asset Management noted valuation problems as the dollar had become “the most expensive asset on almost any measure” at the end of last year.


According to Paolini; “US economic performance had been much better than Europe and China which supported the US currency. “

He added; “We effectively expect Europe and the US to grow at the same rate this year. Retail spending in the US has been flat for five months. You have the Fed cutting rates and you also have dollar outflows because there is all the discussion about taxation and tariffs. The US is a much less interesting and attractive place to invest these days.”

The dollar was unsettled by trade concerns with evidence of a fresh row between the US and Japan, although there is also evidence that the US and EU are close to securing some form of trade deal.

As far as fiscal policy is concerned, the budget bill is still being debated in the Senate after a marathon all-night session.

Commerzbank commented; “If the Republicans can secure a majority in the Senate, the House of Representatives will have to vote on this version again. However, the direction in which we are moving is clear and does not bode well for the US dollar."

The bank also pointed to the economic data; “If the labour market data is weak, the situation should be relatively straightforward. A significant negative surprise would raise expectations of an interest rate cut in July and further weaken the US dollar."

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TAGS: Euro Dollar Forecasts