Euro-Dollar Forecast: Huge Week for the Dollar, Can EUR/USD Break Higher?

Modified: Monday, 20 October 2025 22:30 BST - Written by Frank Davies

STORY LINK Euro-Dollar Forecast: Huge Week for the Dollar, Can EUR/USD Break Higher?

The Euro to Dollar exchange rate (EUR/USD) was unable to hold above 1.1700 on Friday and traded around 1.1660 on Monday with some support near 1.1650.

ING noted French concerns but added; “this week the focus should stay on the US, and a further souring of credit sentiment could send EUR/USD on a path to 1.180.

There will be important data releases late in the week with the PMI business confidence releases and the US consumer prices report.

The US banking sector, government shutdown and political rhetoric will all be potentially market-moving events.

There has been some relief surrounding the US banking sector with equity markets making gains.

Danske Bank noted that earnings releases from the major UK banks have been solid. It added; “Those earnings helped stabilize sentiment and provided some support to the sector overall, even as worries linger around smaller regional lenders.”

ING remained cautious; “Indications that lending issues don’t extend beyond Zions Bancorp and Western Alliance could offer some further relief to the dollar, but it might not be enough to fully price out concerns about the underlying health of the credit market and have the greenback reclaim all losses.

It added; “As Jamie Dimon warned, there may be more ‘cockroaches’ (i.e. distressed lenders) out there after two US regional banks reported credit issues last week. Markets will be looking very closely for evidence of that, and the dollar continues to face substantial downside risks.”

At this stage, markets are pricing in close to 100% chance of rates being cut next week with over a 95% chance that the central bank will cut rates again at the December meeting.

The Fed is now in a blackout period ahead of the meeting and there should be no official comments.

Any unofficial media briefings will be watched closely if there are sharp moves in equity markets.

US-China trade stresses will continue to be a key element. Rhetoric from President Trump was slightly more conciliatory over the weekend, increasing hopes that pressure on China will be successful.

MUFG market participants remain cautiously optimistic that much higher tariffs are unlikely to remain in place for long and may not even be implemented at all helping to dampen the negative market reaction.

Rabobank; “Before we get too carried away with buying the dip on the latest hopes of TACO perhaps it is worth remembering that the advocates of TACO theory are mostly the same people who told us that universal tariffs would never happen, yet here we are.

It added; “To predict what is likely to be the direction of travel on trade there is only one indicator you need to watch, and that is the US goods trade balance.”

S&P downgraded the French credit rating to A+ from AA- after Friday’s market close due to persistent unease over fiscal trends.

ING commented; “Given the fragility of the government, it remains too early to price out the French effect from the euro fully.”

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TAGS: Euro Dollar Forecasts