Euro to Dollar Forecast: "Fed Rate Outlook" to Lift EUR/USD

Modified: Friday, 15 August 2025 08:30 BST - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: "Fed Rate Outlook" to Lift EUR/USD

The Euro to Dollar exchange rate (EUR/USD) posted 2-week highs around 1.1725 on Wednesday before retreating to near 1.1650 on Thursday after the latest US data.

UoB commented; “Further EUR strength is not ruled out, but overbought conditions and a tentative slowing of upward momentum suggest any advance is unlikely to threaten the resistance at 1.1755.”

Scotiabank maintains a constructive view on the outlook; “If anything, losses from yesterday’s peak look to be a consolidation ahead of another push higher. Support is 1.1635. Regaining 1.1710+ should see spot push towards 1.1750.”

Federal Reserve policy remains a key element.

There has been a further net shift in market pricing with a September cut now seen as certain, but traders are pricing in only a marginal possibility of a 50 basis-point cut.

Capital.com analyst Kyle Rodda commented; "For the markets, it's not even a matter of if the Fed cuts interest rates in September, it's a question of how much."

He added; "Signs of a downturn in the labour market have pushed futures to bake in a series of rate cuts before the end of the year."


Treasury Secretary Bessent called for a 50 basis-point cut in September.

MUFG commented; “He believes that if the Fed had the revised weaker employment data available at prior meetings in June and July they would have already started to cut which creates the justification for starting with a larger 50bps cut in September to play catch up. A similar outcome to what happened last year when the Fed started to cut rates by delivering a larger one-off 50bps rate cut.”

The dollar will be vulnerable if there is a further shift in pricing towards a 50 basis-point cut at the September meeting.

US initial jobless claims declined slightly to 224,000 in the latest week from 227,000 previously with continuing claims declining to 1.95mn from 1.97mn.

The data did not back the case for aggressive rate cuts.

According to ING; “Markets aren’t considering a 50bp move as an option, and we doubt they will unless there are hints in that direction from Fed members or if the jobs data falls much further.”

Scotiabank still expects the dollar will struggle; “The Fed rate outlook is likely to weigh on the USD’s outlook and curb its ability to rally in any major way for now.”


There are also still concerns over a political influence on Fed policy with Trump still considering who will be the next Fed Chair.

According to Rabobank; “focusing on which individual gets the hot seat rather than the hotline that will soon run from the White House to the Fed seems to miss the forest for the trees.”

Scotiabank noted; “President Trump indicated yesterday that his choice may be made fairly soon from “3-4” potential picks, which may revive concerns that a “shadow chair” could wield more influence over the longer term policy outlook than the incumbent in the coming months.”

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TAGS: Euro Dollar Forecasts