Euro to Dollar Near-Term Forecast: "Risks Tilted Toward Further USD Strength"

Modified: Monday, 27 October 2025 10:07 BST - Written by Tim Boyer

STORY LINK Euro to Dollar Near-Term Forecast: "Risks Tilted Toward Further USD Strength"

The Euro to Dollar exchange rate (EUR/USD) traded narrowly this week ahead of the Federal Reserve's keenly awaited policy decision, as investors balanced expectations for near-term dollar strength against longer-term bearish projections.

At the time of writing, EUR/USD was holding close to 1.1625, with volatility contained amid a mix of trade, fiscal, and geopolitical uncertainties.

The Dollar remained broadly steady through the week, supported by risk aversion stemming from ongoing fears over a US-China trade war, continued US government shutdown, and wider geopolitical tensions.

Oil prices rose after the US imposed sanctions on Russia’s two largest energy producers, contributing to a cautious tone across global markets.

Meanwhile, delayed US inflation data offered little direction, with headline CPI rising slightly from 2.9% to 3.0%, while core prices edged up 0.2% month-on-month to leave the annual rate at 3.0%, down from 3.1%.

Markets continued to price in a 95% probability of a Federal Reserve rate cut next week, and a similar likelihood of another reduction in December.

Danske Bank believes the dollar may extend its gains in the very short term.


According to Danske:

“The near-term balance of risks remains tilted toward further USD strength, supported by continued short-covering, resilient US cyclical momentum, and favourable near-term rate differentials.”

However, the bank sees this as a tactical move only, expecting EUR/USD to strengthen in the medium term.

Danske added:

“Any USD strength is likely to be tactical, as we continue to see EUR/USD on an upward trajectory, supported by rate differentials, a recovering European asset market, reduced global demand for restrictive policy, continued tailwinds from hedge ratio adjustments, and waning confidence in US institutions.”

Wells Fargo also anticipates some near-term dollar firmness but maintains a more cautious Euro outlook.

The bank commented:

“The broad consensus is for dollar depreciation, investor positioning for further dollar depreciation looks a bit stretched, and with the myriad of risks outstanding, we would not be surprised to see a brief period of dollar strength before the dollar index resumes its trajectory lower.”

The US lender expects the Fed’s monetary path to dictate the next major USD moves, projecting the central bank will halt its cutting cycle by Q2 2026, potentially triggering renewed dollar gains.

It added confidence in the greenback’s global status:

“We hold the view that the dollar is not losing its world reserve currency status… We have been steadfast in this view even though headlines around de-dollarisation have intensified. We do not believe there is a viable or reliable fiat currency alternative to the greenback.”

EUR/USD Forecast: Fed Decision to Define Short-Term Direction

With market positioning finely balanced, attention now turns squarely to the Federal Reserve’s upcoming policy announcement.

A 50bps rate cut is already largely priced in, but forward guidance on the pace of further easing will likely determine whether the Dollar’s resilience continues into November — or fades as investors return focus to longer-term fundamentals favouring the Euro.

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TAGS: Currency Predictions Euro Dollar Forecasts