Euro to Dollar Forecast: EUR/USD Slips to 1.17 as ECB Decision Looms

Modified: Monday, 27 April 2026 07:31 BST - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: EUR/USD Slips to 1.17 as ECB Decision Looms

The Euro to Dollar exchange rate (EUR/USD) has slipped back towards 1.1700, with markets unsettled by rising energy prices and ongoing uncertainty surrounding Middle East developments.

While expectations of European Central Bank tightening and Federal Reserve easing support a stronger medium-term outlook for the Euro, near-term direction remains dominated by geopolitical risks and oil market volatility.

EUR/USD Forecasts: ECB watch

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

Danske notes the high degree of uncertainty over the Iran situation with the scope for notable short-term FX fluctuations including EUR/USD.

EUR/USD retreated to around 1.17 during the week amid fresh concerns over energy prices as the Strait of Hormuz remained blocked.

Danske commented; “Near-term risks to our forecasts are closely tied to geopolitical developments regarding the Iran-escalation.”

Unicredit added; “Markets will not return to focusing on rate differentials as a driver for this pair until the war-driven risk premium has dissipated.”

Markets expect the Fed will err towards cutting rates while the ECB is more likely to tighten, although no change is expected on April 30th.

There is scheduled to be a new Fed Chair next month, although Warsh’s confirmation could still be delayed. Warsh, once installed, is expected to push for lower interest rates.

According to MUFG; “This could be one of the big negative risks for the dollar over the coming year if the Fed cuts rates and inflation remains above target, which seems likely for most of the next year.”

Danske Bank commented; “Rate differentials are set to narrow with ECB hikes and Fed cuts on the horizon this year. We also look for a normalisation of oil prices. Finally, we expect relatively higher US inflation. All three factors point to a higher EUR/USD.”

MUFG notes that the dollar has struggled to gain much traction and added; “the lack of US dollar strength throughout the Middle East conflict does point to negative underlying fundamentals that could exert themselves with increasing force in the months ahead.”

Danske Bank also sees underlying dollar vulnerability; “Medium to long term risks are predominantly tied to the US outlook. If the capital rotation out of US assets continues and a sharp US recession hit, EUR/USD could break substantially higher than our forecast suggests.”

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TAGS: Euro Dollar Forecasts