Euro to Dollar Forecast: 1.20 Possible on "Break Above 1.1830"

Modified: Sunday, 24 August 2025 22:00 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: 1.20 Possible on "Break Above 1.1830"

The Euro to Dollar exchange rate (EUR/USD) tested support below the 1.1600 level in early Europe on Friday before settling just above this level.

The dollar slumped after the comments from Fed Chair Powell with EUR/USD surging to near 1.1730 as Fed Chair Powell hinted that rates would be cut in September.

ING commented; “Chair Powell could have been super balanced, or even hawkish. But he effectively chose to endorse the market discount for a rate-cutting phase ahead. It's had quite the reaction.”

According to UoB; “a sustained advance in EUR/USD would require a clear break above 1.1780.”

Any break above 1.1830 would quickly ignite talk of 1.20.

On a medium-term view, ING sees EUR/USD at 1.20 at the end of 2025.

In his keynote speech to the Jackson Hole Economic Symposium, Powell stated that the shifting balance of risks may warrant adjusting policy.

According to Powell, GDP growth has slowed notably while downside risks to the labour market are rising.

He commented; “While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly.”

As far as tariffs are concerned, he noted that the effects on consumer prices are now clearly visible and expects the effects to accumulate in coming months.

Nevertheless, his base case is that inflation effects will be short lived.

Following Powell’s comments, there was a renewed shift in expectations surrounding interest rates with the chances of a September cut jumping to above 90% from just below 70% ahead of the speech.

Traders are also again more confident that there would be at least two rate cuts by the end of 2025.

Markets are also still monitoring threats to Fed independence and President Trump stated on Friday that he will fire Fed Governor Cook if she does not resign.

According to UBS; “We expect the Fed to resume its easing cycle in September, with further cuts likely at each meeting this year. This should weigh on the dollar into the first half of 2026.

The bank added; “The euro continues to benefit from the combination of stronger growth, less monetary easing ahead, and its role as the default alternative for global investors seeking diversification away from the USD.”

Scotiabank commented; “The Fed will ease policy sooner or later and other constraints on the USD outlook—the softening in US exceptionalism, potential erosion in Fed independence and weak fiscal policy—remain very much intact.”

Scotiabank also maintains a positive stance on the Euro; “We remain medium-term EUR bulls on the basis of an increasingly dovish Fed outlook and an ongoing shift in the ECB’s bias – from dovish to neutral.”

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TAGS: Euro Dollar Forecasts