Euro to Dollar Week Ahead Forecast: 1.20 by Year-End?

Published: Monday, 13 October 2025 10:30 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Week Ahead Forecast: 1.20 by Year-End?

With US-China tensions flaring and French politics still paralysed, the Euro to Dollar (EUR/USD) exchange rate remains caught between competing forces. HSBC sees scope for gains toward 1.20 this year, but Credit Agricole warns the Euro’s structural weaknesses could drag it down to 1.10 longer term.

EUR/USD: Trade wars return

HSBC is continuing to back Euro to Dollar (EUR/USD) exchange rate gains to 1.20 at the end of this year as the Federal Reserve cuts interest rates again.

Credit Agricole, however expects EUR/USD losses to 1.10 by the end of 2026 as the Euro stumbles.

EUR/USD retreated steadily to 6-week lows near 1.1550 during the week before a rebound to 1.1620 as the dollar dipped.

If trade wars ae reignited, market volatility will inevitably surge

There were no major US economic developments during the week as the government shutdown continued. The Euro was hampered by on-going French uncertainty for much of the week, but the dollar posted sharp losses late on Friday after President Trump threatened to impose 100% tariffs on China from November 1st over rare earth mineral exports.

French President Macron reappointed Lecornu as Prime Minister late on Friday, but with no sign of the deadlock being broken.

HSBC noted risks on both side of the equation. On the Euro side it noted; “Familiar headwinds hold back EUR-USD such as insufficient domestic demand and brewing financial instability risks. Even with the German fiscal stimulus, the structural impetus to drive EUR-USD significantly higher remains tepid while fragmented French politics threaten to reawaken Euro crisis tail risks, damping the EUR’s safe haven aspirations.”

It still expects medium-term dollar weakness; “Offsetting this, the US Federal shutdown hardly makes the USD attractive, especially as uncertainty surrounding Fed independence remains. In the near term, we expect EUR-USD will be impeded until greater Gallic clarity allows a move towards our 1.20 year-end target.”

Credit Agricole continued to express reservations over Euro-Zone fundamental which will sap Euro support.

The bank also maintains a positive dollar stance; “We remain of the view that the USD could rebound in the next 6-12 months because improving US economic outlook and sticky inflation (as well as a still-independent Fed) could challenge the current very dovish market Fed outlook, in a boost to the USD rate appeal and a blow to demand for short-USD hedges.

SocGen noted recent dollar resilience; “The reluctance to sell to the dollar this summer despite the breakdown in Treasury yields towards April lows and questions over the independence of the Fed created doubts over the consensus view for further depreciation in 2026.

Markets are still confident that the Fed will cut rates in October and December.

Commerzbank expressed fears over weak US fundamentals, notably persistent US budget deficits; "It seems reasonable to assume that the market will tolerate only so much. Deficits are already extremely high, yet governments are still unable to manage them. In the US, for example, the economy is weakening despite record-high deficits, which means the Fed cannot ignore this and must implement a less restrictive monetary policy.”

SocGen added; “The resilience of the greenback could however be tested in 4Q if the US labour market takes a turn for the worse and the federal government shutdown damages business confidence.”

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TAGS: Euro Dollar Forecasts