Euro to Dollar Forecast: Analysts Split as EUR/USD Eyes Recovery from 1.15

Modified: Monday, 24 November 2025 07:05 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Analysts Split as EUR/USD Eyes Recovery from 1.15

The Euro to Dollar exchange rate (EUR/USD) tested 1.15 as volatility across markets and fading expectations of a December Fed cut lifted the dollar.

Banks remain divided, with near-term pressure set against medium-term forecasts pointing toward a recovery above 1.20.

Markets now focus on Fed policy uncertainty and shifting rate differentials to gauge the next move.

EUR/USD Forecasts: Fed Doubts Intensify

After initial vulnerability, Danske Bank forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.22 on a 12-month view.

Morgan Stanley sees scope for EUR/USD to strengthen to 1.23 by the second quarter of 2026 before losing ground with a retreat to 1.16 by the end of 2026. It forecasts further net losses to 1.14 at the end of the following year.

EUR/USD retrrated to test 1.15 during the week. There was increased volatility across asset classes which provided some dollar benefit.

Following the US jobs data and Federal Reserve minutes, there was also a further slide in expectations of a Fed rate cut at the December policy meeting which supported the US currency.

Danske Bank commented; “we continue to see EUR/USD on an upward trajectory over the medium term – supported by narrowing rate differentials, a recovering European asset market, reduced global demand for restrictive policy, ongoing tailwinds from hedge ratio adjustments, and waning confidence in US institutions.”

According to Morgan Stanley; “Initially we see scope for some additional risk premium in USD to rise again, aided by near-term worries about the US labor market, a refocus on the composition of the FOMC, and continued Fed cuts reducing FX-hedging costs.

It added; “But we don’t expect a return to the magnitudes of risk premium seen in 2Q25, and on net we see a reversal in risk premium closer to 0% by end-2026.”

There remains a high degree of uncertainty over medium-term Fed policy.

UBS commented; “The appointment of a new Fed chair could also shift the policy outlook, potentially resulting in lower rates than currently expected. Additionally, the US’s persistent twin deficits mean the country must continue to attract external funding, which could put further pressure on the USD, especially in the above-mentioned scenario.”

The bank is still cautious over the scope for sustained Euro gains; “While we expect the USD to be among the weakest currencies in 2026, the majority of the decline is likely already behind us, with EURUSD having moved from near parity closer to 1.20 this year.”

According to RBC Capital Markets; “The medium-term case for USD weakness remains very compelling, driven by two primary arguments.”

It expects asset diversification from the US and increased hedging ratios on US assets, both hurting the dollar.

RBC noted potential barriers to EUR/USD gains; “We are aware of the headwinds to long-term EUR/USD strength – US productivity growth outperforms Europe’s, there is no good European alternative to USTs, the US dominates Europe in AI and tech and the EU also still has an undercurrent of political risk.

It added; “Taken on balance, we are comfortable with our target of 1.24 for 2026.”

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TAGS: Euro Dollar Forecasts