Euro to Dollar Forecast: EUR/USD Buyers Pause Ahead of French Government Vote

Modified: Monday, 8 September 2025 22:00 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Buyers Pause Ahead of French Government Vote

The Euro to Dollar (EUR/USD) outlook is caught between European politics and US economic weakness this week.

The pair held above 1.1700 on Monday after last week’s weak jobs report, but traders remain cautious ahead of France’s no-confidence vote, which could trigger fresh elections.

While political risk clouds the Euro, the US labour market remains the dominant driver, with Fed rate cuts seen as inevitable and EUR/USD forecast to push higher into year-end.

EUR/USD Forecasts: The Rally Stalls

The French government confidence vote will be an important short-term issue, although the US economy is liable to remain dominant overall dollar moves.

The Euro to Dollar (EUR/USD) exchange rate has held above 1.1700 on Monday, but held below Friday’s 1.1750 peak triggered by another weak labour-market report.

Dollar sentiment remains weak on expectations of Fed rate cuts, but the French confidence vote has injected caution.

ING commented; “More volatility in a 1.1650-1.1750 range looks likely for EUR/USD this week, and we doubt Thursday’s ECB meeting will be a big market mover.”

Credit Agricole sees the risk of EUR/USD losses beyond 1.1650 if there are fresh elections.

MUFG is bearish on the dollar over the medium term; “Policy divergence between the ECB and Fed heading into year-end supports our forecast for EUR/USD to rise back above the 1.2000-level.”

The US labour market remains a key market focus following last week’s labour-market report.

MUFG added; “The Fed had already signalled it was becoming more concerned by downside risks to the US labour. Those concerns will have been heightened by the August employment report revealing that the US economy added only 22k jobs in August. More worrying for the Fed, the US economy lost -13k jobs in June after further downward revisions to prior months.”

Markets are pricing in a 100% chance of a Fed rate cut next week with a 10% chance of a 50 basis-point cut. Traders are also increasingly confident that rates will be cut three times before the end of 2025.

There is the potential for a further negative development on Tuesday with benchmark revisions.

ING noted; “Tomorrow sees the preliminary annual benchmark revision to the 2025 nonfarm payrolls report. A number in the -500 to 800k is expected. The Fed's Christopher Waller implied a number of around -720k in his speech just over a week ago. A big downward revision to NFP could trigger some limited dollar weakness.”

The French government is facing a no-confidence vote on Monday with strong expectations that it will lose.

President Macron will have to decide between attempting to form another government or calling a general election.

The latest chatter suggests that Macron may attempt to forge a coalition with the socialists, although this would undermine attempts to curb the budget deficit.

ING sees limited scope for Euro-zone contagion; “we are not looking for a eurozone-wide period of stress. Italy and Spain have been enjoying sovereign upgrades recently, and the European Central Bank has its Transmission Protection Instrument (TPI) if things really get out of hand.”

Credit Agricole does see Euro risks; “a new PM could leave the EUR struggling to hold on to its gains.”

MUFG commented; “We are not expecting the pick-up in political uncertainty in France to derail the euro’s current upward trend and/or encourage the ECB to cut rates further at the current juncture.”

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TAGS: Euro Dollar Forecasts