Euro to Dollar Week Ahead Forecast: This Analyst Eyes 1.26

Modified: Monday, 6 October 2025 09:15 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Week Ahead Forecast: This Analyst Eyes 1.26

Foreign exchange analysts remain divided on the Euro to Dollar (EUR/USD) exchange rate outlook as the US government shutdown prolongs the data vacuum.

Nordea expects sustained dollar weakness with EUR/USD rising to 1.26 by 2027, while Credit Agricole sees a recovery toward 1.10 next year.

EUR/USD Forecasts: US data Void

Nordea forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.26 by the end of 2027 with the risk of an even weaker dollar.

Credit Agricole, however, expects the dollar will recover next year with EUR/USD retreating to 1.10 by the end of next year.

EUR/USD was unable to make headway during the week and settled just below 1.1750 with little immediate impact from the US government shutdown.

There were no major Euro-Zone developments during the week.

ADP data suggested further labour-market weakness with a reported 32,000 decline in payrolls for September, but the monthly employment report was postponed due to the shutdown.

The interplay of economics and politics will be crucial in the short term at least.

Nordea expects notable Fed rate cuts which will weaken the currency.

The bank added; “Our base case is that the Fed maintains its policy independence, however, it's a risk worth highlighting. If markets start to believe the Fed is no longer committed to the inflation target, inflation expectations could rise and dollar weaken.”

Deutsche Bank continues to expect further dollar losses; “Negative demand and supply shocks in the US, political pressure for Fed rate cuts, and a flow picture driven by ongoing shifts in hedging behaviour are all contributing to dollar weakness.”

The bank expects that the Euro will be supported by the German fiscal boost. In this context, it sees scope for additional 5-10% dollar losses which would take EUR/USD well above the 1.20 level.

Rabobank sees scope for a limited near-term dollar recovery; “with the market short of USDs, there is a risk of short-covering pressure, should US economic data surprise in the upside.”

The bank is still concerned over risks that the US Administration will look to exert much greater influence over interest rates.

It still expects EUR/USD to strengthen to at least 1.20 next year and added; “Crucial to this view is the assumption that the market will remain uneasy about the prospect of reduced Fed independence which could raise inflation expectations, term premia and pressure the USD.”

According to Credit Agricole; “US rates markets are already pricing in very aggressive rate cuts from here, and this makes us think that many Fed-related negatives are in the price of the USD. We therefore believe that it may take very disappointing US labour data to weigh on the USD on a sustained basis.

It also downplayed the risk of very aggressive Federal Reserve interest rate cuts and added; “The Fed remains institutionally independent and no aggressive Fed easing needed amid recovering economy.”

The bank also does not expect widespread capital flows from US assets amid a lack of viable alternatives.

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TAGS: Euro Dollar Forecasts