Euro to Dollar Forecast: EUR 5-Week Best on Iran Uncertainty

Modified: Monday, 13 April 2026 07:31 BST - Written by Ben Hughes

STORY LINK Euro to Dollar Forecast: EUR 5-Week Best on Iran Uncertainty

The Euro to Dollar exchange rate (EUR/USD) surged to five-week highs near 1.1725 after a temporary Iran ceasefire boosted risk appetite and weakened the dollar.

However, with oil prices rebounding and uncertainty over the Strait of Hormuz unresolved, markets remain cautious, limiting confidence in a sustained EUR/USD breakout.

EUR/USD Forecasts: Iran ceasefire, but no certainty

Nordea still expects that the Euro to Dollar (EUR/USD) exchange rate will strengthen to above 1.20 by the end of 2026 amid weaker US fundamentals.

Scotiabank is backing EUR/USD gains to 1.22 at the end of the year.

During the week, geo-political developments dominate with the mid-week announcement of a cease-fire between the US and Iran.

There was, however, still a high degree of uncertainty and the Strait of Hormuz remained effectively closed with oil prices regaining ground after a sharp initial decline as Brent traded well above $90 p/b.

The dollar lost ground as energy prices declined sharply and risk appetite strengthened. Overall, EUR/USD rallied strongly to 5-week highs around 1.1725.

The US inflation data was close to expectations with the headline figure jumping to 3.3% from 2.4% with the core rate at 2.6% from 2.5%.

Markets remained sceptical that the Federal Reserve would hike interest rates.

Scotiabank commented; “Our call remains that the Fed will cut rates by 50bps over the next 12 months in response to slowing growth momentum. Expectations that other central banks may tighten policy could retrench if a sustained decline in energy prices unfolds but the USD is still likely to soften somewhat as market risk premia re-adjust.”

It added; “Our fair value model for the DXY based purely on front-end spreads suggests the index is significantly (about one standard deviation) overvalued currently.”

Nordea commented; “We note that even amidst bouts of flight-to-safety, the performance of the USD has been far from stellar, and the conflict in the Middle East has not at least bolstered the confidence towards the dollar in the medium term. We thus continue to expect a clearly higher EUR/USD towards the end of our forecast horizon.”

ECB policy will also be a key element.

At this stage, Danske expects the ECB will leave rates on hold at 2.0% this year. It did, however, add; “Due to ongoing uncertainty about the Iran war, we do not see a hold at the April meeting as a done deal yet.”

According to Nordea there will be pressure for a tighter policy; “both anecdotal and survey-based data have started to point to price pressures beyond energy prices, adding to the pre-war price pressures that existed already in many raw materials and components.”

It added; “We now expect the ECB to hike rates four times by 25bp, starting in June. While the ceasefire news immediately tilted the risks to our new ECB baseline to the downside, the outlook remains fraught with uncertainty, while signs of broader price pressures have already started to emerge.”

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TAGS: Euro Dollar Forecasts