Euro to Dollar Forecast: EUR/USD Above 1.16 as Markets Bet on Fed Cut

Modified: Monday, 1 December 2025 12:46 BST - Written by James Fuller

STORY LINK Euro to Dollar Forecast: EUR/USD Above 1.16 as Markets Bet on Fed Cut

The Euro to Dollar exchange rate (EUR/USD) pushed up to 1.1637 as rising expectations of a December Fed cut kept the dollar on the back foot.

The move reinforces the near-term upside bias, even though euro-specific fundamentals remain subdued.

Markets now eye Fed communication and Chair-selection signals to determine whether the rally can extend further.

EUR/USD Forecasts: All About the Fed

HSBC expects the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.1870 over the next 1-2 months.

According to HSBC; “We look for EUR/USD to move higher in the next few weeks, but this is not driven by any optimism over the Euro. Instead, it reflects are caution on US dollar and our expectations that the Federal Reserve will cut interest rates at the December meeting.”

The bank also considers that immediate fears surrounding the French budget and debt levels have subsided.

NatWest has an end-2026 EUR/USD forecast of 1.23 amid a weaker dollar.

Wells Fargo, however, expects that EUR/USD will peak just below 1.20 and retreat to 1.17 at the end of next year.

EUR/USD secured a net gain during the week as the dollar lost ground, but it was unable to hold above the 1.16 level.

Despite clear divisions within the committee, markets are now much more confident that the Federal Reserve will cut rates again at the December meeting after dovish remarks from a key swing member. This shift in expectations tended to undermine the US currency.

Fed policy will inevitably be a key focus during 2026, especially with changes in key personnel.

According to NatWest; “While President Trump’s ultimate pick for Federal Reserve Chair remains unknown, the direction of policy even before Powell’s term ends is clear: a more politically responsive and easier policy stance in 2026.”

HSBC also noted unease over Fed policy; “Looking ahead to 2026, the extent of the Fed’s rate cuts may be influenced by the selection of the next Chair. Recently, US President Trump has indicated he has identified a candidate for the Fed Chair position, and Treasury Secretary Scott Bessent, overseeing the selection process, aims to finalise it next month.”

It added; “The eventual appointee is unlikely to trigger a significant hawkish market repricing, which may keep the USD defensive. Concerns about Fed independence may also heighten, potentially extending and exacerbating the USD’s decline into next year.”

Wells Fargo does see near-term dollar risks; “In our view, as the Fed eases monetary policy quicker than foreign central banks, the U.S. dollar can weaken during the first half of 2026. A more settled global backdrop should also contribute to dollar depreciation over the first few quarters.”

The bank, however, considers that structural risks to the dollar are over-played.

It added; “We do, however, strongly suggest that dollar depreciation is not de-dollarization. So while we forecast near-term dollar weakness, we hold the unwavering view that the dollar will remain the world's reserve currency going forward.

It also expects notably different conditions later next year.

According to the bank; “In fact, once the Fed ends it's easing cycle, we expect greenback strength over H2-2026. As the dollar broadly strengthens, chatter around the end of the dollar's reserve status should diminish.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Dollar Forecasts