Euro to Dollar Forecast: Can EUR/USD Break 1.18 as Fed Cut Bets Grow?

Published: Friday, 12 September 2025 09:00 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: Can EUR/USD Break 1.18 as Fed Cut Bets Grow?

The Euro to Dollar exchange rate (EUR/USD) rebounded to 1.1730 on Thursday as ECB President Christine Lagarde signalled the rate-cutting cycle may be over, lifting the single currency despite mixed US inflation and labour-market data.

Analysts expect EUR/USD to consolidate within the 1.1650–1.1750 range for now, with a sustained break above 1.18 only likely if the Fed accelerates rate cuts while the ECB holds firm.

EUR/USD Forecasts: Secure a Range Break?

The Euro to Dollar (EUR/USD) exchange rate briefly spiked higher after the latest US jobs data and then posted renewed gains as Lagarde’s hints of no further ECB rate cuts boosted the Euro.

EUR/USD advanced to 1.1730 from 1.1660 lows, but the question is whether the Euro can sustain gains and then break higher or whether the dollar will fight back again.

UoB commented; “Today, we expect EUR to trade in a range, most likely between 1.1675 and 1.1735.”

ING added; “For now, we are looking at a re-stabilisation in the 1.170-1.175 area in EUR/USD ahead of the weekend.”

Scotiabank added; “We look to a near-term range bound between 1.1650 and 1.1750.”

Commerzbank commented on the overall EUR/USD outlook; “It is only when it becomes clear that the Fed will deliver further significant interest rate cuts in the coming months while the ECB shows no signs of lowering interest rates further, and Donald Trump continues to undermine the Fed's independence, that we are likely to break through the 1.18 level on a sustained basis.”

US consumer prices increased 0.4% for August after a 0.2% increase previously and compared with consensus forecasts of a 0.3% increase with the year-on-year rate increasing to 2.9% from 2.7%.

Core prices increased 0.3% on the month with the year-on-year rate remaining at 3.1% with both figures in line with expectations.

Elsewhere, initial jobless claims surged to 263,000 in the latest week from 236,000 previously which was above expectations of 235,000 and the highest reading since June 2023.

Following the data market fully priced in three interest rate cuts by the end of 2025.

The potential for a 50 basis-point cut next week also ticked higher to around 12%.

Commerzbank is backing a 25 basis-point cut and on a short-term view added; “it is more likely that EUR/USD will continue to trade within the fairly narrow range of 1.16–1.18.”

ING commented; “relatively benign CPI data could give the go-ahead to re-enter USD shorts that might have been partly held back ahead of the release.”

The ECB held the deposit rate at 2.00% at the latest policy meeting which was in line with strong consensus forecasts.

There was a slight increase in the 2025 and 2026 inflation forecasts, but this was offset by a slight downward adjustment for 2027.

The bank provided little in the way of formal forward guidance.

Bank President Lagarde was, however, more positive on the outlook with comments that the risks to economic growth are now more balanced.

Lagarde also commented that the disinflation process was over. In response, traders are no longer backing further rate cuts by the ECB.

Some investment banks were still cautious.

Capital Economics Deputy Chief Euro-zone Economist Jack Allen-Reynolds; commented; "The bank is unlikely to change interest rates again this year, but we think the risks are skewed towards renewed cuts in 2026."

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TAGS: Euro Dollar Forecasts