Euro to Dollar Forecast: Fed Cut Bets and Bank Jitters Push Euro Rates Higher

Modified: Sunday, 19 October 2025 23:15 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Fed Cut Bets and Bank Jitters Push Euro Rates Higher

The Euro to Dollar (EUR/USD) exchange rate rose to 1.17 as renewed US banking concerns and expectations of further Federal Reserve rate cuts undermined the dollar. ING sees scope for further gains, targeting 1.18 in the weeks ahead.

EUR/USD Forecasts: Euro-Dollar Hits 10-Day Highs

The dollar has come under significant pressure in global markets with strong speculation over further interest rate cuts and a sudden eruption of renewed concerns over the banking sector.

There has also been further rounds of gold buying, illustrating a loss of confidence in the US currency and unease over the US government shutdown.

The Euro to Dollar (EUR/USD) exchange rate jumped to highs just above 1.1720 before settling around 1.1700.

UoB is still relatively cautious over the outlook; “The increasing upward momentum suggests that there is room for EUR to rise further today. However, it remains to be seen whether it can break clearly above the major resistance at 1.1720.”

ING, however, is more confident over the scope for further gains; “the dollar remains in a fragile spot, and a break above 1.750 is surely possible, with 1.180 starting to look very realistic again.”

Risk appetite took a tumble after Thursday’s European close following a warning from two regional banks, Zions and Western Alliance Bancorp, that they had problems with loan losses due to fraud.

ING commented; “The contagion to other risk assets shows not only that markets are still sensitive to regional bank concerns (a legacy of SVB’s 2023 collapse), but potentially to the broader credit market, which has been operating on exceptionally tight spreads over the past few months.”

It added; “Unlike in 2023, the risks appear more isolated this time, but they could feed into a narrative that the US business environment and credit quality are in a poorer state than what data suggests.”

Inevitably, regional bank earnings will be scrutinised closely with the dollar vulnerable if there are further reported difficulties.

Stresses within the banking sector would also make a Federal Reserve interest rate cut more likely.

Traders are now fully pricing in two further rate cuts by the end of 2025 which sapped dollar support.

According to Pepperstone research strategist Dilin Wu there is a wider loss of confidence in the dollar. He added; “Compounding concerns about trade, Fed independence and the U.S. shutdown are making the greenback vulnerable to the "debasement" trade, where investors seek assets that can't easily be devalued.”

He added; "It's really hard to find a bullish scenario for the dollar index."

On the Euro side, French Prime Minister Lecornu survived two confidence votes in the National Assembly which provided a significant element of relief. There are, however, still important underlying stresses with Lecornu having to dilute fiscal reform plans.

Danske Bank noted that credit-rating decisions are due. It commented; “France is on a stable outlook from Moody’s, but given the political uncertainty and deteriorating public finances, it looks highly likely that it will be placed on negative outlook, and the possibility of a downgrade cannot be excluded.”

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TAGS: Euro Dollar Forecasts