Euro to Dollar Weekly Forecast: 5% US Yields Keep Dollar Firm Below 1.15

Modified: Monday, 21 September 2026 09:01 BST - Written by Frank Davies

STORY LINK Euro to Dollar Weekly Forecast: 5% US Yields Keep Dollar Firm Below 1.15

The Euro to Dollar exchange rate (EUR/USD) has fallen to seven-week lows below 1.1500 after the Federal Reserve raised interest rates and signalled that further tightening remains likely.

The Dollar continues to benefit from elevated US yields and persistent energy-price risks, but the longer-term debate is shifting towards whether the Fed will ultimately be forced to reverse course as inflation and economic growth slow in 2027.

EUR/USD: Fed buckles

CIBC is backing Euro to Dollar (EUR/USD) exchange rate gains to 1.20 by June 2027 as the Fed reverses course next year and cuts rates.

Credit Agricole expects a retreat to 1.13 by the end of 2026 with only a slight gain to 1.14 by the middle of next year as the dollar holds firm.

EUR/USD dipped to 7-week lows below 1.15 after the Fed policy meeting and was unable to recover ground.

The Federal Reserve increased interest rates by 25 basis points to 4.00%, in line with strong market expectations.

There was a 12-0 vote for the decision while comments from Chair Warsh were generally hawkish as he reiterated that the central bank could focus on inflation given that the economy was robust and close to full employment.

According to the latest updates from committee members, most expect that there will be a further hike by the end of this year.

Markets also fretted over elevated energy prices and upward pressure on bond yields with the US 10-year yield around 5.00% and around 3-year highs.

According to Credit Agricole; “In all, we maintain a constructive outlook on the USD in the very near term. While the latest FX price action meant that the USD has started to ‘close the gap’ to its relative rate and yield appeal vs the rest of G10, it continues to trade at a huge

discount vs these fundamental drivers.”

The bank also noted geo-political risks; “The USD near-term outlook would also depend on its attractiveness as a safe-haven, and next week investors will focus on the outcome of the US-China summit & the evolving situation in the Middle East.”

US monetary policy will inevitably have a major impact, through the US outlook and global conditions.

CIBC notes the risk of a further hike this year, but expects a different narrative next year. According to the bank; “In 2027, inflation should abate with the effects of tariffs and higher oil prices from the Iran war waning, while growth should decelerate as AI capital spending slows. That would prompt the Fed to bring the policy rate down towards neutral, with two quarter points cuts in the latter half of 2027.”

Nordea adopts a more hawkish stance; “As the Committee raises rates for the first time since 2023, it comes into question whether this is a one-time hike or the start of a new hiking cycle.”

It added; “History suggests that hikes rarely arrive alone, and they have never done so in this century. Our forecast points the same way.”

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TAGS: Euro Dollar Forecasts