Euro to Dollar Week Ahead Forecast: EUR/USD Upside on Fed Weakness

Modified: Monday, 18 August 2025 07:00 BST - Written by Tim Boyer

STORY LINK Euro to Dollar Week Ahead Forecast: EUR/USD Upside on Fed Weakness

Foreign exchange analysts at Danske Bank forecast the Euro to Dollar exchange rate (EUR/USD) to gain to 1.23 on a 12-month view.

The bank commented; “We remain USD bears both tactically and strategically, continuing to fade potential rallies. We still see EUR/USD on a higher trajectory, supported by relative rates, a recovering European asset market, and the reduced global need for contractionary policy.”

EUR/USD strengthened to above 1.1700 during the week, but is trading below this level in indicative markets as the Russia-US talks failed to secure a ceasefire in Ukraine or make headway towards a wider settlement.

Geo-political developments will be important, but Federal Reserve policy will remain a crucial element over the few weeks and months.

Markets remain very confident that the Fed will cut interest rates at the September policy meeting.

UBS commented; “With next week’s US data calendar relatively light besides the flash PMIs on Thursday, the attention will shift to the Jackson Hole Symposium, where Fed Chair Powell may use the opportunity to outline the restart of the easing cycle.

According to ING; “The great-and-the-good of the American central banking world are off to the Fed’s annual Jackson Hole conference. And for Chair Jerome Powell, his appearance could hardly come at a more challenging moment.”


UBS added; “The combination of softer economic data and dovish policy signals point to further USD weakness in the coming months. As a result, we maintain our view that EURUSD will move higher, targeting 1.21 by year-end.”

The issue of Federal Reserve independence will also remain a key element as the Administration continues to put strong pressure on the central bank.

The issue of the next Fed Chair after Powell’s term ends in May 2026 will also continue to be a key background factor.

According to Danske Bank; “For the USD, the focus is less on whether new FOMC members or the next chair will lean dovish – that is already expected – and more on the potential erosion of Fed credibility and independence should monetary policy become increasingly politicised. Any such concerns would be a significant headwind for the greenback.”

Berenberg sees a limit to near-term dollar losses; “provided the Fed continues to demonstrate its autonomy and does not bow to political pressure from the White House, which we expect, we believe that a significant weakening of the US dollar beyond the current movement is rather unlikely by the end of the year.”

On a medium-term view it added; “However, should the Fed fail to withstand the attacks from Trump and his supporters, this would further call into question the safe-haven status of the US dollar.”

JP Morgan sees dollar vulnerability From the US side, the motivation rests on US growth catch-down to the rest of the world; more persistent inflationary pressures which will erode US policy rates; elevated term premium and finally, Fed independence.


It expects EUR/USD will move above the 1.20 level.

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TAGS: Euro Dollar Forecasts