Euro to Dollar Forecast: EUR/USD Set for Gains in Early 2026

Modified: Monday, 10 November 2025 11:15 BST - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: EUR/USD Set for Gains in Early 2026

The Euro to Dollar exchange rate (EUR/USD) dipped to three-month lows at 1.1470 during the week, but has since recovered to around 1.1575 amid concerns over the US government shutdown and the US labour market.

Forecasts from SocGen and MUFG suggest EUR/USD will strengthen to 1.20 in early 2026, but the outlook remains clouded by ongoing uncertainty over the US economy.

EUR/USD Forecasts: Shutdown fears

Foreign exchange strategists at SocGen forecast that the Euro to US Dollar rate will strengthen to 1.20 in the first quarter of 2026, but won’t be able to sustain the gains with a retreat to 1.14 by the end of 2026.

MUFG also expects EUR/USD will strengthen to 1.20 early next year but expects dollar weakness will continue during the year with a third-quarter forecast of 1.26.

EUR/USD dipped to 3-month lows at 1.1470 during the week before a recovery to around 1.1575 amid fresh concerns surrounding the US labour market.

At this stage, markets are pricing in just over a 65% chance that the Federal Reserve will cut interest rates again in December.

There is, however, major uncertainty over the outlook with the on-going government shutdown amplifying the lack of clarity and increasing reservations.

MUFG comented; “There is no end in sight to the shutdown and the longer this drags on the bigger the economic implication will be.”

It expects; “Renewed USD depreciation by yearend and in 2026.”

Challenger reported that layoffs in October surged 175% from a year ago to 153,074, the highest October figure for 20 years. For the first 10 months of the year, layoffs have increased 65% from the previous year to around 1.1mn.

ADP, however, did register an increase in private payrolls of 42,000 for October after a revised 29,000 decline the previous month.

The dollar will be notably vulnerable if there is evidence of serious labour-market deterioration. The narrative will, however, be different if the economy is resilient and growth holds firm.

SocGen commented; “If the growth differential returns to wider levels, more in line with the average of the last decade, why would the euro not drift back towards that longer-term average? It will get some support from narrower rate differentials, but even those suggest EUR/USD ought to be lower than it is today.”

According to ING; “We think it’s too early to call time on the dollar bear trend and the EUR/USD rally. The house call is for three more Fed rate cuts, and there is much uncertainty over both the shape of the US labour market and whether political pressure will bear down on the Fed next year.”

The bank added; “Our 1.20 forecast for EUR/USD for the end of this year is now a bit of a stretch. But year-end seasonality and the true state of the US jobs market should be supportive. And some modest gains next year are still the preferred call.”

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TAGS: Euro Dollar Forecasts