Euro to Dollar Forecast: Traders Brace for Key Signals from Fed Chair Warsh

Modified: Monday, 15 June 2026 09:31 BST - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: Traders Brace for Key Signals from Fed Chair Warsh

The Euro to Dollar exchange rate (EUR/USD) enters a pivotal week with investors focused squarely on the Federal Reserve's latest policy decision. While no rate increase is expected this month, growing speculation that the Fed could tighten policy later this year has provided fresh support for the US Dollar and left EUR/USD vulnerable after recent tests of the 1.1500 area.

EUR/USD Forecasts: Crucial Fed decision

ING sees the risk that the Euro to Dollar (EUR/USD) exchange rate will weaken to 1.13/1.14 during the summer period with a risk that any recovery will not extend beyond 1.16/1.17 by year-end compared with the previous forecast of 1.20.

ABN still sees the potential for EUR/USD to regain strength with an end-2026 forecast of 1.20.

EUR/USD dipped to test the 1.1500 area during the week before a recovery to 1.1570 amid fresh optimism over a US-Iran deal.

The next major focus will be this week’s Federal Reserve policy decision. Markets expect no hike this month, but there has been increased chatter of a hike later this year.

ING notes that the US economy has been resilient. It added; “That cyclically bullish dollar story looks set to dominate over the coming months as the Fed rides out the inflation spike at a time of stable employment. The fact that we are pushing our call for a Fed rate cut back from this December and deep into 2027 is clearly going to create some headwinds to EUR/USD.

It added; “Additionally, higher energy prices through the rest of 2026 – especially our call for a belated pick-up in natural gas prices – mean that we have to cut our EUR/USD forecast profile.”

Bank of America (BoA) also sees pressure for a tightening; “Any hint of further upside pressure from the data, or a less assertive dovish tone from Warsh could serve as the next (non-Iran related) catalyst for a dollar rally.”

BoA also looked at the importance of energy prices; “Even as there has been some associated reprieve in energy markets, upside risks point to downside risks to the Euro. This suggests a real possibility of further USD supportive Fed repricing, while ECB hikes could prove counter-productive for the EUR.”

According to BNP Paribas; “We now expect the Fed's next policy move to be a hike, aimed at starting to withdraw the monetary stimulus provided by 2025's three insurance cuts.”

BNP added; “We are now entering the period where the USD will perform best: the currency tends to rally as markets price in hikes rather than when tightening is delivered.”

ABN is not backing Fed rate hikes; “Our base case sees the ECB hiking twice over the June and July meetings, taking the deposit rate to 2.5%. For the Fed, with policy already still in somewhat restrictive territory and with arguably a more dovish reaction function than the ECB, we expect rates to stay on hold, with a risk tilted towards a later resumption of rate cuts (our base case is for a December cut).”

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TAGS: Euro Dollar Forecasts