Euro to Dollar Forecasts: RBC Sees 1.24 by 2026, Credit Agricole Targets 1.10

Modified: Monday, 22 September 2025 10:15 BST - Written by Ben Hughes

STORY LINK Euro to Dollar Forecasts: RBC Sees 1.24 by 2026, Credit Agricole Targets 1.10

The Euro and the US Dollar currencies swung after the Federal Reserve’s rate cut, with EUR/USD briefly spiking to four-year highs above 1.19 before retreating under 1.1750.

Policy divergence remains in focus as the Fed signals further easing while the ECB stays on hold.

RBC Capital Markets forecasts the Euro-to-Dollar exchange rate climbing to 1.24 by 2026, though Credit Agricole expects a retreat to 1.10 next year.

EUR/USD Forecasts: Fed to Dominate

RBC Capital Markets forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.24 at the end of 2026 as the dollar continues a long-term decline.

Credit Agricole is more positive on the dollar and expects EUR/USD will retreat to 1.10 at the end of next year.

The Euro to Dollar (EUR/USD) exchange rate briefly hit 4-year highs above 1.19 after the Federal Reserve policy decision before sliding to below 1.1750 as the dollar recovered ground on short covering.

On a short-term view ING commented; “We are sticking to our call for EUR/USD to climb back to the 1.1850 handle in the coming days.”

The Federal Reserve cut interest rates by 25 basis points to 4.25% at the latest policy meeting, in line with consensus forecasts.

New Governor Miran dissented and called for a 50 basis-point cut. One member, probably Miran, backed substantial rate cuts over the next year which helped drag forecasts lower.

The median forecast was for two further rate cuts this year.

RBC maintains a bearish dollar stance; “The medium-term case for USD weakness remains very compelling, driven by two primary arguments. First, there is an expectation of asset diversification, which drives a passive reallocation away from the US. This is a very long-cycle driver and may need several years to pan-out.”

It added; “Second, is the cost-of-hedging argument as Federal Reserve rate cuts beginning in 2025 are expected to increase equity and rates hedge ratios for foreign investors. We expect this theme to continue to gain momentum into 2026.”

Danske Bank commented; “We still see EUR/USD on an upward trajectory, targeting 1.23 on a 12M horizon, supported by rate differentials, a recovering European asset market, reduced global demand for restrictive policy, and continued tailwinds from hedge ratio adjustments and diminished confidence in US institutions.”

It did, however, see scope for near-term resilience; “We remain strategically bearish on the USD but see scope for a near-term rebound, as we do not expect the Fed to ease as aggressively as markets price.”

Credit Agricole downplayed the risks of a politicised Fed; “We think that the institutional framework in place in the US should be sufficient to safeguard the Fed’s independence and therefore its credibility. We thus continue to see the USD rebounding in 2026 against the backdrop of recovering economy and sticky inflation in the US as well as fewer Fed rate cuts than expected by the US rates market at present.”

Markets no longer expect further ECB rate cuts.

According to Credit Agricole, good news is priced in; “Given that markets have fully embraced the bank’s neutral outlook, however, and as this has been supporting the EUR of late, we think it would take positive data surprises to see the currency extending its recent gains across the board.”

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TAGS: Euro Dollar Forecasts