Euro to US Dollar Forecast: "EUR Could Test 1.1380 Level"

Modified: Thursday, 31 July 2025 21:30 BST - Written by Frank Davies

STORY LINK Euro to US Dollar Forecast: "EUR Could Test 1.1380 Level"

The dollar lost ground in immediate reaction to the Federal Reserve statement, but there was a sharp reversal following Chair Powell’s relatively hawkish press conference. Powell effectively rebutted Trump’s repeated calls for lower rates and triggering another shift in market expectations.

From near 1.1500, the Euro to Dollar (EUR/USD) exchange rate slumped to 7-week lows just above 1.1400.

There was a slight reassessment on Thursday with EUR/USD near 1.1450.

On a near-term view, UoB commented; “EUR could test the 1.1380 level. Given the oversold conditions, a sustained drop below this level seems unlikely. On the upside, resistance levels are at 1.1460 and 1.1490.”

According to ING; “Given short dollar positioning and thinning summer markets, this EUR/USD correction could extend a little further. 1.12/1.13 seems quite far – but can’t be ruled out in a short, sharp unwind of crowded trades.”

The Federal Reserve held interest rates at 4.50%, in line with strong consensus forecasts.

Governors Waller and Bowman both dissented and called for a 25 basis-point rate cut to 4.25%. This was not a surprise given recent comments from the two, but was the first double dissent for 30 years.


The statement noted that economic activity had moderated, but added; “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.”

There were no hints in the statement that the central bank was planning a September cut.

Chair Powell did note that there were downside risks to the labour market, but again emphasised uncertainty and pointed out that there were several key economic reports due before the next Fed meeting.

Powell also hinted that on pure inflation grounds and the risk of tariff-related price increases, the central bank could have justified increasing rates.

Powell also refused to be drawn surrounding the potential for a move in September and considered that a key indicator to watch was the unemployment rate.

In this context, the labour-market data will be watched closely on Friday.

In an immediate reaction traders priced in less than a 50% chance of a September rate cut which boosted the dollar in global markets.


ING does not expect clear evidence that inflation is under control until October/November and expects the Fed to wait until December.

Nordea added; “We still don't see the case for cutting rates any time soon.”

Danske Bank is still backing a September move due to tariffs; “as the trade-weighted average tariff rate appears to be settling close to 20%, rising costs will continue to put pressure on profit margins and households' real purchasing power. We expect this to dampen new hiring and put further pressure on consumption in H2, eventually tilting the Fed to resume cutting rates in the September meeting.”

Trade developments will also continue to be watched closely ahead of the August 1st deadline to reach agreements.

Overnight, President Trump adopted a tough stance against India and Canada, but US equities held a firm tone, lessening the risk that there will be short-term dollar selling.

National Australia Bank senior currency strategist Rodrigo Catril commented; "The dollar is not just consolidating, but it's actually getting a little bit of upward momentum. The broader picture as well is that all these tariffs, there's at least an initial impression that the U.S. is the one that's got the upper hand."

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TAGS: Euro Dollar Forecasts