Euro to Dollar Forecast: Long-Term Target 1.22 as Fed Uncertainty Weighs on USD

Modified: Monday, 17 November 2025 09:00 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Long-Term Target 1.22 as Fed Uncertainty Weighs on USD

The Euro to Dollar exchange rate (EUR/USD) climbed to 1.1620 last week after the US currency softened amid renewed uncertainty over the timing and accuracy of economic data following the end of the government shutdown.

Markets now face a critical “data catch-up” phase that could determine whether the Federal Reserve cuts interest rates again in December.

EUR/USD Forecasts: Data catch-up

ING forecasts that the Euro to Dollar rate will strengthen gradually to 1.22 by the end of 2026.

EUR/USD secured a net gain to 1.1620 during the week as the dollar lost ground.

The US Congress voted to end the government shutdown this week, but there is still a high degree of uncertainty over the underlying situation.

Berenberg commented; “With the end of the government shutdown, transparency is slowly returning, even though many inflation and labour market figures are still based on estimates.”

It added; “The key question for the markets now is: When will official economic data be published again?”

A key factor will be the impact on Federal Reserve policy. There are clear divisions within the committee and confidence in another Fed cut in December has faded with traders now pricing in close to a 50% chance that there will be no further move.

Scotiabank commented; “We expect that the Federal Reserve will largely look through these price pressures, arguing that they are more likely to be one-off shocks related to tariffs rather than indicative of broader price pressures.

It added; “There is also clearly immense political pressure on the Federal Reserve to be more aggressive in pursuing rate cuts.”

The bank expects that the Fed Funds rate will be cut to 3.0% next year.

It also notes a high degree of uncertainty over trade and fiscal policies which will inevitably increase the potential risks to forecasts.

ING also expects rates will be cut to near 3.00% and expects that this will encourage increased hedging ratios with global funds finding is less expensive to take protection against a weaker dollar.

It added; “In addition, there remains sufficient uncertainty around Fed policy to demand a risk premium in the dollar. Changes on the Fed board early next year and potential political pressure on the central bank ahead of the November midterms warn that US dollar real rates drift towards neutral and weigh on the dollar.”

ING noted other potential risks; “Additionally, a resurgence of concerns around US debt sustainability and the build-up of political risk premium ahead of the November 2026 midterm elections are both tangible risks.”

Euro-Zone developments will also be important. According to ING; “It may not feel like it today, but we’re looking for the eurozone economy to accelerate through 2026. The region has the savings to be put to work, and we are looking for German fiscal stimulus to register in 2026.”

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TAGS: Euro Dollar Forecasts