Euro to US Dollar Forecast: EUR/USD Showing Signs of Renewed Weakness

Modified: Tuesday, 7 October 2025 22:15 BST - Written by Tim Boyer

STORY LINK Euro to US Dollar Forecast: EUR/USD Showing Signs of Renewed Weakness

The Euro to Dollar exchange rate (EUR/USD) recovered the 1.1700 level later on Monday, but failed to hold the gains and retreated to 1.1665 on Tuesday. The Euro and yen were again undermined by political factors with the dollar tending to gain support by default despite on-going US concerns.

ING commented; “EUR/USD has been finding support at 1.1650, but it feels like downside risks are building in the absence of fresh news from the US.”

According to UoB; “The buildup in downward momentum is not sufficient to suggest a continued decline just yet. That said, there is scope for EUR to test the late-Sep low of 1.1645. At this point, it is unclear whether EUR can break clearly below this level.”

The Euro is continuing to be undermined by unease surrounding the French political situation.

Prime Minister Lecornu retracted his resignation and agreed to hold fresh talks with a Wednesday deadline. If there is no progress, his resignation will take effect.

According to MUFG; “Downside risks for the euro would increase if parliamentary elections were called before the end of this year extending the period of political uncertainty.”

It still expects net EUR/USD gains; “It would make it less likely that EUR/USD would rise up to our year-end target of 1.2000 although we are not convinced parliamentary elections would be sufficient on their own to trigger a sustained reversal of the strengthening trend for the euro that has been in place for most of this year.”

There has not been a significant change in Federal Reserve pricing with traders pricing in over a 90% chance of a cut at the October meeting with close to an 80% chance of a further move in December.

There are still important uncertainties surrounding risks to Federal Reserve independence and political pressure for more substantial interest rate cuts.

Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen commented; "True independence for a central bank consists of its ability to make mistakes without facing political consequences. I fear, however, that this is exactly what the Fed cannot afford right now.”

She added; “If it mistakenly keeps its monetary policy too restrictive for too long, thereby risking a severe recession, there is a significant danger that the US government could capitalize on such a policy mistake, place the Fed under tighter oversight, and perhaps even gain public support for such intervention.”

This suggests that the Fed will err towards rate cuts.

Danske Bank now expects four further Fed rate cuts by July 2026 with the first move in October.

According to the bank; “We see near-term risks as more balanced for the USD. The longer the US government shutdown persists, the greater the downside risk, as an extended impasse would likely push the Fed to cut later this month.”

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