Euro to Dollar Forecast: Can EUR/USD Challenge 45-Month Best?

July 24, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: Can EUR/USD Challenge 45-Month Best?

The dollar posted sharp losses on Tuesday with the Euro to Dollar (EUR/USD) exchange rate surging to 2-week highs just above 1.1750 before settling just below this level with Administration rhetoric against Federal Reserve still sapping support while there is solid underlying Euro demand.

According to UoB, the Euro is looking a bit stretched; “While there is potential for EUR to rise above 1.1765 today, overbought conditions suggest it might not be able to hold above this level.”

ING is not convinced that EUR/USD can hold above 1.1700.

Danske Bank maintains a positive long-term outlook on EUR/USD for a move above 1.20 for the first time since June 2021; “While EU-US trade negotiations may introduce near-term volatility, long-term drivers such as relative rates, capital flows into European assets, and global monetary conditions continue to support the cross.”

Overnight, President Trump announced that the US had reached a framework trade deal with Japan.

There will be a 15% tariff on Japanese exports to the US while Japan has committed to purchases of aircraft and rice.

Japan also pledged a $550bn sovereign wealth fund to invest in the US, although there will be scepticism that this will make much headway.


ING discusses the weak dollar performance. It noted the possibility that trade jitters were a significant factor in undermining the currency, but considers that the overall price action makes this unlikely.

According to the bank; “This week's losses could somehow represent a catch-up with some lower US yields seen last week or merely represent some investor re-allocation out of the US and into say Europe or Emerging Markets on a global growth play.”

It added; “we suspect that EUR/USD demand is related to the ongoing rotation out of assets in the equity, government bond and credit space. Indeed, news from the credit space is that global investors are showing a keener interest in euro-denominated products, and issuers are obliging.”

Federal Reserve policy and the threat of political intimidation remains an important underlying market element.

There has been some walking back from calls for Fed Chair Powell’s immediate departure, but no let-up in attacks on Fed policy.

In comments on Tuesday, Treasury Secretary Bessent stated that there was no need for Powell to step down immediately as he will be leaving in May anyway.

Markets are still concerned that Powell is under threat.


Schwab senior fixed income strategist Kathy Jones commented; "You can criticize the Fed for many of its policy moves over the years. But pushing the Fed chair out because he won’t follow White House instructions is a step too far."

She added; "It will undermine confidence in the central bank at a time when inflation is still too high, and policy is a confusing mix of priorities. If Powell is replaced by someone who is seen as doing the administration’s bidding, it would likely lead to a weaker dollar and much higher long-term interest rates."

There are very strong expectations that the ECB will leave interest rates at 2.00% on Thursday with guidance likely to be crucial for the market reaction.

According to ING, there is some risk of a Euro retreat; “We think a relatively quiet July meeting could feature some heightened scrutiny on how comfortable policymakers would be with another euro rally. FX considerations may not make their way to official communication, but could help tilt the balance to a more dovish overall tone.”

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TAGS: Euro Dollar Forecasts