Euro to Dollar Weekly Forecast: Fed Outlook Continues to Support USD

Modified: Monday, 13 July 2026 09:01 BST - Written by James Fuller

STORY LINK Euro to Dollar Weekly Forecast: Fed Outlook Continues to Support USD

The Euro to Dollar exchange rate (EUR/USD) has stabilised above the 1.1400 level, but the US Dollar continues to enjoy firm underlying support as investors scale back expectations of a prolonged period of Dollar weakness.

Although recent geopolitical tensions have boosted demand for safe-haven assets, markets remain primarily focused on the resilience of the US economy and whether the Federal Reserve will ultimately need to keep interest rates higher for longer.

EUR/USD Forecasts: Dollar Bears Retreat

Goldman Sachs has lowered its 12-month Euro to Dollar (EUR/USD) exchange rate forecast to 1.12 from 1.20 previously.

According to Goldman; “we are unlikely to return to broad-based sustained dollar depreciation for some time.”

JP Morgan continues to see the potential for EUR/USD to retreat to 1.10 over the next few months.

EUR/USD found support below 1.14 during the week and edged higher, but was unable to make significant headway.

The dollar drew limited support from a spike in oil prices as the US and Iran traded military strikes amid the on-going battle to control the Strait of Hormuz.

Credit Agricole commented; “With FX carry trades still dominant, the near-term G10 FX markets outlook would depend on the resilience of market risk sentiment and the evolution of the respective relative central bank policy outlooks. The return of US-Iran tensions is worrisome, but it remains to be seen whether it could trigger a full-blown risk aversion spike.”

The US economy and outlook for interest rates will remain a key element.

Goldman does see some potential headwinds for the dollar; “We see downside risks stemming from more balanced activity and policy prospects or a re-emergence of the credibility concerns that undermined the dollar's high valuation last year.”

On the other hand, the bank notes the possibility that markets will revise their Federal Reserve interest rate forecasts even higher which would potentially trigger strong dollar buying.

It added; “Our baseline is instead that US performance should be sufficiently solid for investor demand for US assets to be stronger than last year.”

According to JP Morgan; “The two outcomes for the dollar are now either consolidation or data-driven strength. If US data doesn't provide a catalyst soon and energy prices remain soft, there will be offsets to the dollar bullish narrative stemming from the RoW catching up.

It added; “The bullish dollar leg could take a breather following the US employment report, but the data is firm enough to prevent a substantial weakening.”

In France, the conviction against National Rally leader Le Pen was upheld, but shifts in the ruling means she can stand in the 2027 Presidential election.

Credit Agricole commented; “We note that the combination of returning political risks in France and the tightening of global financial conditions could leave the EUR vulnerable to further widening of sovereign credit spreads to Bunds. In the near term, therefore, EUR/USD will continue to take its cue from the path of the OAT-Bund yield spread as well as the EUR-USD rate differential.”

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TAGS: Euro Dollar Forecasts