Euro to Dollar Forecast: EUR/USD Swings as Markets Reprice the Fed

Modified: Monday, 9 February 2026 09:01 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Swings as Markets Reprice the Fed

The Euro to Dollar exchange rate (EUR/USD) is being driven almost entirely by Federal Reserve expectations, with investors reassessing the outlook for US rate cuts amid mixed labour-market signals, political uncertainty and growing scrutiny of the Fed’s next leadership.

After a sharp pullback from recent highs, EUR/USD has stabilised below 1.18 as markets weigh weakening US jobs data against the risk of a dollar rebound, leaving the pair highly sensitive to incoming payrolls and Fed rhetoric.

EUR/USD Forecasts: All about the Fed

MUFG forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.25 at the end of 2026 as the dollar is subjected to further pressure.

SocGen, however, expects that any near-term gains will fade with a retreat to 1.14 by the end of this year as the dollar recovers and the Euro fades.

EUR/USD posted sharp losses to below 1.18 amid a wider dollar rebound and unwinding of long Euro positions, but stabilised later in the week.

SocGen commented on potential selling above 1.20; “Client conviction still low over a sustained move above 1.20.”

A partial US shutdown delayed the latest US employment report. There was, however, an increase in jobless claims for the latest week and the JOLTS data also recorded a sharp decline in job openings to the lowest level since August 2020.

ING commented; “The Fed is becoming more relaxed about the US jobs market. Yet data this week makes that look complacent. And payroll numbers next week will be key.”

It added; "Major downward revisions to payrolls next week would add to the pressure to eventually resume rate cuts."

Markets now see close to a 20% chance of a rate cut in March and close to a 75% chance of a move by June. Wider issues surrounding Fed policy remain crucial elements for the markets.

According to MUFG; “Further rates cuts and the predictable uncertainties associated with the Trump presidency points to further dollar depreciation this year. Trump described the dollar’s

performance as “great” in January and the Fed checking rates in USD/JPY will ensure investors continue to suspect the Trump administration wants a weaker Dollar.”

Any rhetoric from Fed Chair nominee Warsh will be watched closely.

Lloyds commented on the outlook; “How Warsh intends to reshape the Fed ought to become clearer during the Congressional confirmation hearings . The focus will be on how he could deliver rate cuts — which he must surely have promised to get the job.”

It added; “Whether Powell feels he needs to stay on as Governor, to help protect Fed independence, will be important too . It’ll become clear fairly soon whether the three rate cuts delivered at the end of last year have stabilised the labour market.”

The ECB held the deposit rate at 2.00%, in line with strong expectations. There was no formal guidance and President Lagarde played down the potential risks from a stronger Euro.

Rabobank commented; “We continue to see policy on hold through 2026.”

SocGen, however, sees scope for a looser ECB monetary policy; "We expect disinflation to dominate 2026, driven by moderating wage growth and supportive commodity dynamics, particularly in Brent and agricultural prices.”

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TAGS: Euro Dollar Forecasts