Euro to Dollar Forecast: Strong Eurozone Growth Lifts EUR/USD above 1.15

Modified: Friday, 31 July 2026 11:01 BST - Written by James Fuller

STORY LINK Euro to Dollar Forecast: Strong Eurozone Growth Lifts EUR/USD above 1.15

The Euro to Dollar exchange rate (EUR/USD) extended its sharp recovery to around 1.1527 on Thursday evening, gaining 0.5% as weaker US growth and softer monthly inflation data triggered renewed Dollar selling.

The Euro’s domestic backdrop also improved after Eurozone growth exceeded expectations and German inflation accelerated, while Citi said the Federal Reserve’s latest guidance had reduced the risk of further near-term US rate increases.

EUR/USD Forecasts: 1.15 Break Brings 1.16 into View

EUR/USD was quoted at 1.1527, having gained more than 1.2% from Tuesday’s closing level near 1.1386.

The pair has broken decisively above 1.1500, which should now provide initial support if investors take profits following the two-day advance.

Further support is located around 1.1470 and 1.1450, while resistance above the current market is expected near 1.1550 followed by 1.1600.

The Federal Reserve voted 9–3 to leave its target range unchanged at 3.50%–3.75%, with Beth Hammack, Neel Kashkari and Lorie Logan preferring an immediate quarter-point increase.

Despite the unusually hawkish vote split, markets focused on Chair Kevin Warsh’s press conference and the absence of a clear signal that another rate increase was imminent.

According to Citi; “We read Chair Warsh’s comments at the press conference as dovish.”

The bank also noted that Warsh suggested “higher rates might be the dominant but not the only solution to higher inflation”, indicating that the Fed could continue relying on broader financial conditions to restrain price pressures.

Citi believes the meeting has capped the immediate scope for further Dollar gains, although it does not expect the decision to trigger a sustained collapse in the US currency.

Thursday’s US economic releases reinforced the less supportive Dollar environment.

The US economy expanded at an annualised rate of 1.5% during the second quarter, slowing from 2.1% during the opening three months of the year.

Monthly inflation data also softened, with the headline personal consumption expenditure price index falling 0.1% in June and the core measure rising by only 0.1%.

Annual inflation remained elevated at 3.7%, while core inflation stood at 3.3%, suggesting that the case for another Fed increase has weakened rather than disappeared completely.

The Eurozone economy, meanwhile, expanded by 0.4% during the second quarter after stagnating during the first three months of the year.

Annual growth accelerated to 1.0%, with Germany, France and Italy all recording quarterly growth of 0.2% and Spain expanding by 0.7%.

German inflation also increased from 2.4% to 2.8% in July as energy inflation surged to 8.3%.

Underlying inflation was more encouraging, with the core rate easing from 2.5% to 2.4%, but the renewed headline increase maintained pressure on the European Central Bank to remain cautious.

Deutsche Bank expects the ECB deposit rate to rise from 2.25% to 2.50% in September, commenting; “A hike in September feels more or less a done deal.”

The bank has also warned that continued energy-price pressure could eventually require an additional increase to 2.75%.

Bank of America remains much more cautious on the Euro’s prospects, despite Thursday’s advance.

The bank forecasts EUR/USD at 1.12 at the end of the third quarter before a recovery to 1.15 at year-end and 1.20 by the end of 2027.

Its argument rests on relatively high US real yields, stronger medium-term US growth and the risk that markets are underestimating how much further the Fed may need to tighten.

UBS takes a more constructive view, forecasting EUR/USD at 1.16 by September, 1.18 at year-end and 1.20 by March and June 2027.

Thursday’s rally has brought the UBS September target within reach, although a move towards 1.18 would require the Dollar’s yield advantage to weaken more decisively.

Near-Term EUR/USD Forecast: Eurozone Inflation to Decide 1.16 Test

Friday’s preliminary Eurozone inflation release will provide the next test for the Euro, with headline inflation expected to edge higher from 2.8% to 2.9%.

A firm reading, particularly if core inflation remains persistent, would reinforce expectations of a September ECB increase and could drive EUR/USD through 1.1550 towards 1.1600.

The US Employment Cost Index will also be released on Friday and could revive the Dollar if wage pressures prove stronger than expected.

A combination of softer Eurozone inflation and firm US employment costs could pull EUR/USD back below 1.1500, exposing support around 1.1470 and 1.1450.

Near-term momentum now favours the Euro, but the contrast between Citi’s less bullish Dollar assessment and Bank of America’s 1.12 forecast remains significant.

Holding above 1.1500 after Friday’s data would strengthen the case for an extension towards 1.1600, while a close below 1.1470 would suggest that the latest rally was primarily a post-Fed positioning adjustment.

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TAGS: Euro Dollar Forecasts