Euro to Dollar Forecast: USD Confidence Tested as EUR Holds Near 1.18

Modified: Monday, 16 February 2026 09:01 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: USD Confidence Tested as EUR Holds Near 1.18

The Euro to Dollar exchange rate (EUR/USD) is holding near 1.18 after failing to sustain a move above 1.19, as stronger US jobs data steadied the dollar while markets continue to question longer-term confidence in US policy, Federal Reserve direction and global capital flows.

EUR/USD Forecast: Dollar Credibility vs Global Rotation Trade

Nordea forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.24 at the end of 2026 with a further advance to 1.27 at the end of the following year as dollar confidence is eroded.

ING expects limited gains to 1.22 at the end of this year with no change the following year.

EUR/USD jumped to above 1.19 early in the week before a retreat after stronger than expected US jobs data and settled close to 1.1850..

Nordea notes that European fiscal policy has been relatively tight over the past few years which has held the Euro back.

According to the bank a reversal is on the cards; “This is about to change with large investments going into defence and infrastructure. The last few months have made this need perhaps even more obvious. It seems likely to lead to higher growth, but given low unemployment, perhaps also higher inflationary pressure further out and higher interest rates.

It added; “This development should support the alternative to USD and pave the way for more upside to EURUSD.”

ING also expects the dollar to lose further ground this year.

It also sees scope for greater confidence in the European and global outlook; “The ‘pull’ factor is the rotation into pro-cyclical and EM currencies as investors bet on global growth this year. ‘Resilience’ is an oft-used word to describe much of the global economy, which has so far survived the tariff threat.”

The bank does not expect major ECB concerns; “It is early days, but it seems the eurozone recovery is on track and the ECB will not react to a strong EUR/USD until it’s closer to 1.25.”

It also notes potential dollar vulnerability; “The ‘push’ factor remains concerns about US policymaking and the future Fed under Kevin Warsh. Equally, the US labour market is softening, and the Fed looks set to cut in June and December.”

Bank of America also sees dollar risks; “We count on lower US rates, perhaps alongside Fed independence risks, China stimulus, strong FX hedging activity and a somewhat lower bar for upside surprises in Europe vs mid-2025.”

Goldman Sachs sees scope for a reduction in US allocations; “we see reasons for global investors to dial down their Dollar exposure over time, led by a more balanced global return profile.”

The bank added; “deeper concerns around potential US capital rates of return could lead to deeper Dollar downside than we expect. It is much too soon to say, on either the possible catalyst or the end result for FX, but these developments bear close monitoring.”

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TAGS: Euro Dollar Forecasts