Euro to Dollar Forecast: EUR/USD Stalls Below 1.18 Despite 1.20 Targets

Modified: Thursday, 25 September 2025 08:48 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: EUR/USD Stalls Below 1.18 Despite 1.20 Targets

The Euro to Dollar exchange rate traded back below 1.18 on Wednesday after weak German confidence data, though banks remain split on the outlook.

Danske Bank favours a tactical dollar rebound, while ING and MUFG still expect EUR/USD to push towards 1.20 into year-end.

EUR/USD Forecasts: Trades Below 1.18

The Euro to Dollar (EUR/USD) exchange rate advanced to a high of 1.1820 in Asia on Wednesday, but dipped sharply after much weaker than expected German business confidence data and traded around 1.1770.

UoB expects further range trading; “there is no marked change in either downward or upward momentum,” and we reiterated our view that EUR is still trading in a range of 1.1715/1.1855.”

Danske Bank sees scope for a limited near-term dollar recovery; “Looking ahead, we continue to favour a tactical USD rebound. With limited scope for further dovish Fed repricing, the USD remains moderately attractive near term - though this week may prove more about consolidation given the lack of fresh catalysts.”

Danske still expects medium-term EUR/USD gains to above 1.20.

ING commented; “We remain moderately bullish on EUR/USD in the near term, although we doubt it will be smooth sailing to 1.200 from here.”

The German IFO index dipped to 87.7 for September from a revised 88.9 for August and below market expectations of 89.3 with both the current assessment and expectations components weakening on the month.

ING commented; “All in all, today’s Ifo index serves as a painful reminder of how high hopes can quickly evaporate into thin air. The optimism of the first months of the year has swiftly been brought back down to earth.

It added; “This does not automatically mean that hopes for a recovery should be given up entirely – but it does mean that the economy is set for yet another year in stagnation.”

US monetary policy will also be a key component for currency markets.

In comments on Tuesday, Fed Chair Powell emphasised a very unusual situation in the labour market with a sharp decline in supply and demand. Powell noted that balancing the risk of high inflation and a stumbling job market was a challenging situation.

Markets are still pricing in close to a 95% chance that rates will be cut again at the October meeting with close to an 80% chance of two cuts by year-end.

Given that markets have priced in these cuts, the dollar could gain some ground if these cuts are in doubt.

MUFG still expects medium-term dollar losses; Assuming the labour market continues to show weakness and there are no nasty upside CPI surprises, there should be a path to two 25bp rate cuts in October and December. That will ensure the scope for further moderate dollar depreciation by year-end remains.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Dollar Forecasts