Euro to Dollar Forecast: Short-Term USD Rebound vs Medium-Term Bearish Outlook

Modified: Monday, 29 September 2025 10:00 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Short-Term USD Rebound vs Medium-Term Bearish Outlook

The Euro to Dollar (EUR/USD) exchange rate continues to trade near 1.1700 as analysts weigh short-term dollar resilience against longer-term bearish forecasts.

Danske Bank warns that stronger US growth and inflation risks could fuel a near-term rebound, but SocGen, Wells Fargo, and Morgan Stanley all see scope for EUR/USD to break above 1.20, with targets as high as 1.25 into 2026.

EUR/USD Forecasts: Dollar fightback

SocGen expects the Euro to Dollar (EUR/USD exchange rate will strengthen through 1.20 this year and extend gains to at least 1.25 in the first half of 2026.

Wells Fargo sees scope for EUR/USD gains to 1.22 by the second quarter of next year before a retreat to 1.20 at the end of next year.

The dollar was able to make net gains during the week, although it failed to hold its best levels with EUR/USD recovering from 3-week lows at 1.1660 to trade at 1.1700.

Solid US data helped underpin the US currency with markets slightly less confident that the Federal Reserve would cut rates twice over the remainder of 2025.

Danske Bank commented; “The post-FOMC price action proved frustrating for USD bears. We see near-term risks skewed to the upside for the US growth momentum, with inflationary pressures in particular underappreciated. A shift in the market focus from labour data to inflation could prompt a recalibration of Fed cut expectations and potentially spark a short-term USD rebound.”

Most investment banks maintain a bearish dollar stance over the medium term.

According to Wells Fargo; “In the context of slower U.S. economic growth and a more decisively dovish shift from the Fed relative to many of its foreign central bank peers, we think U.S. dollar weakness can continue into early 2026.”

Morgan Stanley commented; “Our Currency Strategists argue that the shift in the Fed's reaction function to prioritize employment over inflation broadens out the scope for USD weakness. They envision a sustained “USD bear regime,” in which USD real rates are falling and break-evens widening.”

It added; “They highlight that this type of USD bear regime is noteworthy not just for the breadth and magnitude of USD weakness it typically produces, but also the frequency with which it precipitates declines in the USD — Currencies tend to strengthen versus USD 67-84% of the time in this regime.”

SocGen expects steady dollar losses, especially with official help; “The bottom line, however, is that the President wants lower rates and a weaker dollar. If we conclude that the dual mandate is even slightly tilted in favour of supporting growth rather than containing inflation, then the medium-term implication is bearish for the dollar.”

Wells Fargo expects a reversal later next year; “Eventually, we expect the U.S. dollar to stabilize and strengthen starting in H2-2026. By that stage, U.S. economic growth should be on more stable footing, while Fed monetary easing should come to an end with policy interest rates still at a relatively elevated level relative to most G10 peers.”

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TAGS: Euro Dollar Forecasts