Euro to Dollar Week Ahead Forecast: EUR/USD Pressured by Rising US Inflation Risks

Modified: Monday, 8 June 2026 09:01 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Week Ahead Forecast: EUR/USD Pressured by Rising US Inflation Risks

The Euro to Dollar exchange rate (EUR/USD) remains under pressure after stronger-than-expected US economic data reinforced expectations that the Federal Reserve may need to keep interest rates higher for longer. With US inflation risks still building and the European Central Bank preparing to raise rates this week, investors are weighing whether the dollar's recent strength has further to run.

EUR/USD Forecasts: US Inflation pressures

Danske Bank continues to forecast that the Euro to Dollar (EUR/USD) exchange rate will slide to 1.12 over the next few months.

MUFG sees near-term risks of EUR/USD losses, but expects a rebound to 1.20 by the end of 2026 as the dollar loses ground.

EUR/USD was unable to make any headway during the week and tested 8-week lows below 1.16 after stronger than expected US jobs data.
There is still a high degree of uncertainty over the Iran situation. Bank of America FX strategist Alex Cohen commented; “There is a lot of uncertainty surrounding the war, and there are expectations some deal could be imminent, which could alleviate some of the pressure on oil markets
It added; "But every day this goes on, the risks get greater and greater for higher oil prices and higher global inflation," he added, forecasting some near-term dollar strength.”
Underlying economic developments will also be important.
According to ING; “It’s hard to argue against dollar strength at this juncture. Data continues to paint a picture of resilience for the US economy – ADP payrolls and ISM services were both firm yesterday – and fresh US-Iran military exchanges have driven a risk-off shift in global markets.”

Danske expects increased inflation concerns; “we point to the combination of fiscal easing, quantitative easing and regulatory easing, which we think has altered the course for demand in the economy and will start to create real worries in the Federal Reserve about persistent and possibly even rising inflationary pressures.”

It added; “we think the magnitude of these shocks warrants mitigation in the form of a couple of rate hikes – one in December and one in March next year.”

Despite scope for near-term gains, MUFG has a bearish medium-term outlook; “US inflation data is likely to show a pick-up in the coming months but happening in the context of a 60-day deal extension and the reopening of the Strait of Hormuz will allow Fed officials to look through this and focus on potential downside risks to growth.

It added; “We see that approach as reinforcing downside risks for the US dollar and hence we are maintaining our bearish outlook for the dollar over the forecast period.”

There are expectations that the ECB will raise interest rates this week with the deposit rate at 2.25%.

Nordea expects a hawkish ECB stance; “We continue to expect that the ECB will begin hiking rates in June. Even under a scenario in which the Strait of Hormuz reopens soon, price pressures are unlikely to vanish quickly.”

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TAGS: Euro Dollar Forecasts